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The financial plan for a construction company.
Running a successful construction company goes beyond just executing projects efficiently; it's also about making smart financial decisions.
In this post, we'll delve into the essentials of creating a financial plan that can help your construction business prosper.
From understanding your initial investment to managing daily operating costs and forecasting future growth, we're here to guide you through each step.
So, let's get started on the path to turning your construction company into a financial powerhouse!
And if you need to get a full 3-year financial analysis of your construction project without having to crunch the numbers yourself, please download our financial plan tailored for construction companies.
What is a financial plan and how to make one for your construction company?
A financial plan for a construction company is an essential roadmap guiding you through the financial aspects of your construction business.
Think of it as laying the foundation for a building project: You need to know the resources at your disposal, what you aim to build, and the costs associated with constructing your projects. This plan is crucial when starting a new construction company, as it turns your expertise in construction into a well-organized business operation.
So, why create a financial plan?
Imagine you're planning to launch a robust construction company. Your financial plan will help you comprehend the expenditures involved - such as acquiring land, purchasing construction equipment and materials, initial labor costs, hiring skilled workers, and marketing expenses. It’s similar to assessing your tools and budget before embarking on a significant construction project.
But it's more than just adding up costs.
A financial plan can provide insights similar to uncovering an efficient building technique. For instance, it might show that sourcing materials from distant suppliers is too costly, encouraging you to find quality local suppliers. Or, you may realize that hiring a large crew is not necessary in the initial phases of your projects.
These insights help in avoiding overspending and overstaffing.
Financial plans also serve as a predictive tool for spotting potential risks. Suppose your plan shows that reaching your break-even point – where your revenue equals your expenses – is achievable only if you complete a certain number of construction projects annually. This insight highlights a risk: What if you don't secure enough contracts? It prompts you to consider alternative strategies, like expanding into renovation services or commercial construction, to increase revenue.
How does this differ for construction companies compared to other businesses? The main difference lies in the types of costs and revenue patterns.
That’s why the financial plan our team has developed is specifically designed for the construction industry . It cannot be directly applied to other types of businesses.
Construction companies face unique expenses such as site preparation, compliance with building codes, and fluctuating material costs. Their revenue can also vary significantly - consider how economic cycles might affect construction demand, unlike businesses with more consistent sales patterns, like a grocery store.
Our financial plan takes all these specific factors into account. This way, you can accurately create customized financial projections for your construction company venture.
What financial tables and metrics include in the financial plan for a construction company?
Creating a financial plan for a new construction company is a critical step in ensuring the success and sustainability of your enterprise.
It's important to understand that your future construction company's financial plan is more than just figures on paper; it's a strategic guide that assists you through the initial stages and supports the long-term operation of the business.
The first fundamental component is the startup costs. This encompasses everything required to launch your construction company.
Consider the expenses of acquiring construction equipment, initial inventory of materials, leasing or purchasing office space, vehicles, safety gear, and even marketing. These costs paint a clear picture of the initial capital needed. We have detailed these costs in our financial plan , saving you the hassle of searching elsewhere.
Next, factor in your operating expenses. These ongoing costs include salaries for your workforce, utility bills, material purchases, insurance, and other daily expenses. Accurately estimating these expenses is crucial to understand how much revenue your company needs to generate to be profitable.
In our financial plan, we've pre-filled all the necessary values, giving you a solid starting point for the operating costs typical in the construction industry. These assumptions can be modified in the 'assumptions' tab of our financial plan.
A key table in your financial plan is the cash flow statement (included in our plan). This statement tracks the expected inflow and outflow of cash in your business.
It provides a monthly and annual breakdown that includes your projected revenue (the income from construction projects) and your projected expenses. This statement is vital for predicting periods when you might need extra financial resources or when you can consider expansion or acquisition of new equipment.
Another essential table is the profit and loss statement, also known as the income statement, which is part of our financial plan.
This official financial table offers insights into the profitability of your construction company over a specified period. It lists your revenues and deducts the expenses, showing whether you're operating at a profit or a loss. This statement is crucial for monitoring the financial health of your business over time.
Additionally, the break-even analysis is a must (also included, of course). This calculation indicates the revenue level needed to cover all costs, both initial and ongoing. Understanding your break-even point is important as it sets a clear sales target to achieve.
We've also incorporated other financial tables and metrics in our plan (such as the provisional balance sheet, financing plan, working capital requirement, ratios, charts, etc.), offering a comprehensive and detailed financial analysis for your construction company.
Can you make a financial plan for your construction company by yourself?
Yes, you actually can!
As highlighted above, we have developed a specialized financial plan specifically designed for construction company business models .
This plan includes financial projections for the initial three years of your construction business operation.
Within the plan, you'll discover an 'Assumptions' tab that contains pre-filled data relevant to construction businesses, covering revenue assumptions, a detailed list of potential expenses specific to the construction industry, and a workforce hiring plan. These figures can be easily customized to fit the particular needs of your construction project.
Our comprehensive financial plan covers all critical financial tables and ratios, including the income statement, cash flow statement, break-even analysis, and a provisional balance sheet. It is designed to be fully compatible with loan applications and is accessible to entrepreneurs at all levels, even those with no previous experience in financial management.
The process is automated to simplify financial planning, eliminating the need for manual calculations or complex Excel formulas. Just enter your specific data into the designated fields and choose from the provided options. We have made this process as user-friendly as possible, catering to individuals who may be new to using financial planning tools.
If you encounter any challenges, our team is readily available to assist. We promise a response within 24 hours to help resolve any issues you might have. In addition, we offer a complimentary review and correction service for your financial plan once you have input all your assumptions.
What are the most important financial metrics for a construction company?
Succeeding in the construction business requires not only mastery in building and design but also a solid grasp of financial management.
For a construction company, certain financial metrics are particularly crucial. These include your revenue, cost of goods sold (COGS), gross profit margin, and net profit margin.
Your revenue reflects the total income from construction projects, providing a clear insight into your market position and client demand. COGS, which encompasses the cost of materials, equipment, and direct labor, is vital for understanding the direct expenses related to your services.
The gross profit margin, calculated as (Revenue - COGS) / Revenue, indicates the efficiency of your project management, while the net profit margin, the percentage of revenue left after all expenses, shows the overall financial health of your company.
Projecting sales, costs, and profits for the initial year requires thorough analysis of various elements. Begin by evaluating the construction market in your area and understanding your target clientele. Base your sales estimates on aspects like local demand, competition, and pricing strategies.
Costs can be categorized into fixed costs (such as office rent and machinery maintenance) and variable costs (like construction materials and hourly labor). Be prudent in your estimates, and account for fluctuations in the market and seasonal variations in demand.
Creating a realistic budget for a new construction company is essential.
This budget should include all anticipated expenses, from equipment purchases and leasing costs to labor, marketing, and a contingency fund. It's crucial to set aside funds for unforeseen expenses as well. Maintain a flexible budget and regularly revise it based on actual performance.
In financial planning for a construction company, vital metrics include your break-even point, cash flow, and project turnover.
The break-even point indicates the volume of work needed to cover costs. A positive cash flow is critical for operational stability, while a good project turnover rate suggests efficient management of construction projects and resources.
Financial planning can vary significantly between different types of construction businesses.
For instance, a residential construction company might prioritize cost-effective sourcing of materials and efficient labor management, aiming for a high volume of smaller projects. On the other hand, a commercial construction company might deal with higher project costs and longer timelines, focusing on securing larger contracts and maintaining strong client relationships.
It's important to recognize signs that your financial plan may be off-track. We have outlined these indicators in the “Checks” tab of our financial model, providing guidelines to swiftly correct and adjust your financial plan for relevant metrics.
Red flags in a construction company's financial plan might include consistently missing project deadlines, rapidly diminishing cash reserves, or equipment that is either underutilized or overextended. If your actual figures consistently deviate significantly from your projections, it's a clear sign that your financial plan needs to be revised.
Key indicators of financial health in a construction company's financial plan include a stable or increasing profit margin, healthy cash flow enabling comfortable coverage of all expenses, and consistently meeting or exceeding project completion targets.
No worries, all these indicators are monitored in our financial plan , and you will be able to adjust them as needed.
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Construction Business Plan Template
Written by Dave Lavinsky
Construction Business Plan
You’ve come to the right place to create your construction business plan.
We have helped over 100,000 entrepreneurs and business owners create business plans and many have used them to start or grow their construction companies.
Sample Construction Business Plan Outline
Below is a construction business plan example to help you create each section of your own construction business plan:
Executive Summary
Business overview.
VB Residential Construction Company is a startup construction company located in Milwaukee, Wisconsin. The company is founded by two cousins, Victor Martinez and Ben Schmidt. Together they have over 20 years of experience in constructing homes from design concept, remodeling and renovating homes. They are highly skilled in all aspects of construction and have garnered a positive reputation in the local construction community for their ethical practices and competitive skill set. Now that Victor and Ben have an extensive network of clients and contacts, they have decided to begin their own residential construction company.
Product Offering
The following are the services that VB Residential Construction Company will provide:
- Custom home building/design build
- Home remodeling and renovation
- Project Management
- Kitchen and bath construction
Customer Focus
VB Residential Construction Company will target those individuals and industry professionals requiring home construction services in Milwaukee, Wisconsin. Those individuals are landowners looking to develop homes on their lots, architects who have clients needing homes built, developers who have the vision but need a company to make it a reality, and households needing home remodeling services.
Management Team
VB Residential Construction Company will be led by Victor Martinez and Ben Schmidt. Together they have over twenty years of construction experience, primarily in residential builds, remodeling, and renovation. They both started at a young age working and learning from their fathers. When they graduated from high school, their fathers got them jobs at the construction company they were employed at. The four family members worked together for ten years at the construction company. The fathers recently decided they were going to retire from the industry which prompted Victor and Ben to branch out on their own and start their own residential construction company.
Success Factors
VB Residential Construction Company will be able to achieve success by offering the following competitive advantages:
- Friendly and knowledgeable contractors who are able to take any project from concept to reality.
- Unbeatable pricing – Clients will receive the best pricing in town for services on any project while maintaining the best quality and customer satisfaction.
Financial Highlights
VB Residential Construction Company is seeking $200,000 in debt financing to launch its construction business. The funding will be dedicated towards securing a small office space, purchasing two trucks, and purchasing all the construction equipment and supplies. Funding will also be dedicated towards the advertising agency and three months of overhead costs to include payroll of the staff, rent, working capital, and monthly fees to the accounting and human resources firm. The breakout of the funding is below:
- Trucks: $40,000
- Construction equipment, supplies, and materials: $100,000
- Advertising agency in charge of promotions: $10,000
- Three months of overhead expenses (rent, payroll, HR and accounting firms): $40,000
- Working capital: $10,000
Company Overview
Who is vb residential construction company.
VB Residential Construction Company is a newly established contracting company located in Milwaukee, Wisconsin. Founded by cousins, Victor Martinez and Ben Schmidt, they have over 20 years experience in the construction industry. VB specializes in residential remodeling, kitchen and bath construction, as well as custom home building. VB Residential Construction Company also offers residential design, construction, and project management services. VB prides itself in delivering a level of expert craftsmanship to fulfill the vision for the client while exceeding expectations at exceptional value.
Company History
VB comes from the initials of the owners, Victor Martinez and Ben Schmidt, two cousins who have been working in the construction industry most of their lives. Both of their fathers spent decades as contractors and raised their sons working and learning the construction trade. The four have been working for another residential contractor in Milwaukee and have built and remodeled numerous homes for multiple builders and clients. Now that both of their fathers are retiring from the construction industry, Victor and Ben have decided to start their own residential construction company and use their years of experience, expertise, and contacts to be an independent residential contractor.
Since incorporation, VB Residential Construction Company has achieved the following milestones:
- Registered VB Residential Construction Company, LLC to transact business in the state of Wisconsin.
- Located a small office space to have a physical address for the company as well as a receptionist.
- Reached out to their numerous contacts to include real estate agents, developers, architects, and landowners to advise them on their upcoming construction company in order to start getting construction contracts.
- Began pricing out costs for trucks and necessary construction equipment.
- Began recruiting a team of contractors that cover different areas of construction to include mechanical, plumbing, electricians, and roofing.
The following will be the services VB Residential Construction Company will provide:
Industry Analysis
Revenue for the Construction industry is expected to continue growing over the five years as demand for new housing expands. Revenues are expected to reach $107 billion.
Relatively low interest rates, coupled with rising per capita disposable income, is expected to support individual investment in new homes, providing an opportunity for industry revenue growth over the next five years.
Per capita disposable income is expected to rise steadily over the next five years, while concurrently, unemployment will drop, proving favorable conditions for industry growth.
Housing starts are expected to rise an annualized 2.9% and this growth is projected to stem partly from forward-looking consumers that choose to purchase homes while interest rates are low. Relatively low housing stock and relatively low interest rates are expected to lead demand for industry services to increase over the next five years.
Customer Analysis
Demographic profile of target market.
The precise demographics for Milwaukee, Wisconsin are:
Customer Segmentation
VB Residential Construction Company will primarily target the following customer profiles:
- Households in search of home remodeling services
- Landowners who would like to build homes on their lots
- Architects who have clients that need home building or remodeling services
- Developers who have already partnered with landowners and/or architects and are in search of a residential contractor
Competitive Analysis
Direct and indirect competitors.
VB Residential Construction Company will face competition from other companies with similar business profiles. A description of each competitor company is below.
JM Remodeling
JM Remodeling has been in business in Milwaukee, Wisconsin since 1990. They are a full-service design and build company. JM Remodeling specializes in residential and commercial restoration and renovation including custom carpentry, kitchens, bathrooms, roofing, siding, dormers, additions, home gyms, home offices, porches and decks, and mechanical services. JM Remodeling carries a staff of plumbers, electricians, journeymen carpenters, restoration specialists, roofers, siders, sheet metal workers, and expert estimators. JM Remodeling also has an apprenticeship program to train employees within the company. They are licensed, bonded and insured and also part of the National Association of Remodeling Industry (NARI). JM Remodeling also provides warranties on all their services. The work is guaranteed by labor warranties, factory warranties, and extended warranties.
Cream City Construction
Cream City Construction has more than 50 years experience in home design, remodeling and renovation in the Greater Milwaukee area and Southeastern Wisconsin. The home remodeling services they provide are additions, whole house remodeling, kitchens, bathrooms, lower levels, master suites and historic renovations. Cream City Construction is a design build company that works with the client to create the design plans, generate project costs, and build the project.
Cream City Construction is owned and managed by Todd Badovski and Jim Grote. Together they have decades of experience and have spent years refining the skills required to run a high end, quality driven remodeling company. The majority of their projects come from repeat business or referrals from clients delighted with their previous service. Cream City Construction is also a member of the National Association of Remodeling Industry (NARI) as well as the Historic Milwaukee Incorporated.
Sazama Design Build Remodel, LLC
Former restaurant owner Don Sazama established Sazama Design Build Remodel, LLC in 1987 after becoming a Master Carpenter. He wanted to merge his passions of business and design and expand his skills in carpentry and architecture. Don’s firm has completed over 700 homes and won 11 awards from the Milwaukee Home and Living magazine. Sazama Design Build Remodel builds homes that are modern and luxurious and have completed many large remodels of bathroom and kitchen renovations. Sazama likes to collaborate with firms such as Ivy Interiors and an award-winning landscape designer, Gingko Leaf Studio. Sazama Design Build Remodel can build and design all aspects of a home – from a home office, outdoor entertaining area, serene spas, and inviting kitchens. The team at Sazama is able to do a historic renovation, build or renovate into something modern and posh, or keep it traditional.
Competitive Advantage
VB Residential Construction Company will be able to offer the following advantages over their competition:
Marketing Plan
Brand & value proposition.
VB Residential Construction Company will offer the unique value proposition to its clientele:
- Highly trusted and professional contractors with over 20 years of experience remodeling, renovating, and building homes.
- Unbeatable pricing to its clients – VB Residential Construction Company does not mark up its services at a large percentage. They will offer the lowest prices in town.
Promotions Strategy
The promotions strategy for VB Residential Construction Company is as follows:
Word of Mouth/Referrals
Victor and Ben have built up an extensive list of contacts over the years providing home construction services for numerous highly satisfied clients. Most of the clients are repeat customers and have also referred them to other associates for home projects. These referrals and repeat customers are very likely to use VB Residential Construction Company instead of the previous construction company Victor and Ben were employed at.
Professional Associations and Networking
VB Residential Construction Company will become a member of construction and professional associations such as the National Association of Remodeling Industry (NARI) and the Milwaukee Chamber of Commerce. VB will also become a member in associations where other builders, developers, and architects are a part of. They will focus their networking efforts on expanding their client network.
Print Advertising/Billboard
VB Residential Construction Company will invest in professionally designed print ads to display in programs or flyers at industry networking events. They will also invest in two billboards to display in highly trafficked areas of town.
Website/SEO Marketing
VB Residential Construction Company will utilize the same advertising company that designed their print ads and billboards to also design their website. The website will be well organized, informative, and list all their services that VB is able to provide. The website will also list their contact information and a gallery of pictures that show their previous projects. The advertising company will also manage VB’s website presence with SEO marketing tactics so that anytime someone types in the Google or Bing search engine “Milwaukee residential contractor”, “contractor near me”, or “residential contractor near me”, VB Residential Construction Company will be listed at the top of the search results.
The pricing of VB Residential Construction Company will be moderate and on par with competitors so customers feel they receive value when purchasing their services.
Operations Plan
The following will be the operations plan for VB Residential Construction Company.
Operation Functions:
- Victor Martinez and Ben Schmidt will be the owners and managers of the company. They will oversee all staff, contractors, and subcontractors. They will also act as project managers for every job they receive and handle all pricing and bids to the client.
- Victor and Ben will employ a team of contractors under them that will have an array of skill sets. The contractors will be trained and experienced either in plumbing, mechanical, electrical, roofing, or siding. Not all contractors need to be certified in all trades, but they need to be certified in at least one of the trades.
- Office manager/assistant to be located at the small office. This person will handle all incoming calls, assist with visiting clients, bookkeeping and maintain files.
- Victor and Ben will utilize a third-party human resources company to handle all hiring, onboarding, payroll, and benefits for the staff. The HR company will also handle all employee issues.
- Victor and Ben will also pay a third-party accounting firm to manage all the high level accounting and tax payments.
Milestones:
VB Residential Construction Company will have the following milestones complete in the next six months.
3/1/202X – Finalize contract to lease small office space
3/15/202X – Execute advertising agency contract 4/1/202X – Begin networking and placing bids for construction jobs
5/1/202X – Begin recruiting and hiring team of contractors
5/15/202X – Purchase all necessary construction equipment, supplies, and trucks
6/1/202X – Start on first official job as VB Residential Construction Company
Victor and Ben are highly skilled at project management and residential construction. They are also both certified in plumbing, electrical, and mechanical. In the next few years, they will be certified as Master Carpenters.
Financial Plan
Key revenue & costs.
The revenue drivers for VB Residential Construction Company are the upcharge they will charge to the clients for their services. VB will purchase or subcontract a service at cost and will charge a 15% markup in order to obtain the markup fee. 15% is below the normal 25%-30% that other competing residential contractors charge.
The cost drivers will be the overhead costs required in order to maintain a construction company. The expenses will be the costs to purchase and maintain construction equipment and trucks, payroll and overhead costs for the staff, and rent and utilities. Other expenses will be the cost for the advertising agency, accounting firm, human resources firm, and membership association fees.
Funding Requirements and Use of Funds
VB Residential Construction Company is seeking $200,000 in debt financing to launch its construction business. The funding will be dedicated towards securing a small office space, purchasing two trucks, and purchasing all the construction equipment and supplies. Funding will also be dedicated towards the advertising agency and three months of overhead costs to include payroll of the staff, rent, and monthly fees to the accounting and human resources firm. The breakout of the funding is below:
Key Assumptions
The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.
- Initial Monthly Average Contract Amount: $20,000
- Growth in Average Monthly Contracts: 10%
Financial Projections
Income statement, balance sheet, cash flow statement, construction business plan faqs, what is a construction business plan.
A construction business plan is a plan to start and/or grow your construction business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.
You can easily complete your construction business plan using our Construction Business Plan Template here .
What Are the Main Types of Construction Companies?
Construction companies can be classified according to the type of constructions that they perform. Some are small renovation contractors, others are new home builders and others are commercial construction companies.
What Are the Main Sources of Revenues and Expenses for a Construction Company?
Construction companies get their primary source of revenue from individual contracts for new homes, remodeling projects or commercial projects.
The key expenses for construction companies are office space rent, salaries and wages, and equipment costs.
How Do You Get Funding for Your Construction Business Plan?
There are many options for financing a construction company like SBA loans, commercial loans, personal loans, or line of credit. There are also equipment funding opportunities that cover expenses associated with necessary tools, machinery and other equipment. Personal savings, credit card financing and angel investors are also popular forms of funding.
What are the Steps To Start a Construction Business?
Starting a construction business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.
1. Develop A Construction Business Plan - The first step in starting a business is to create a detailed construction business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.
2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your construction business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your construction business is in compliance with local laws.
3. Register Your Construction Business - Once you have chosen a legal structure, the next step is to register your construction business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.
4. Identify Financing Options - It’s likely that you’ll need some capital to start your construction business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.
5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.
6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.
7. Acquire Necessary Construction Equipment & Supplies - In order to start your construction business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.
8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your construction business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.
Learn more about how to start a successful construction business:
- How to Start a Construction Business
Where Can I Get a Construction Business Plan PDF?
You can download our free construction business plan template PDF here . This is a sample construction business plan template you can use in PDF format.
Other Business Plan Templates
Food Truck Business Plan Template
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The Ins and Outs of Writing a Construction Business Plan (Free Template)
By Shannon Mulligan
A strong foundation is essential for a construction job—and starting a construction business. And how do you do that? By setting up your business for success with a solid construction business plan.
Read on to learn about why you need a construction business plan, how to create one in six easy steps, and a free template to get you started.
What’s a business plan for a construction company?
A business plan is a document that outlines a company’s business activities, goals, and how its activities will help achieve its objectives. It documents a business’s market research, financial projections, mission statement, and offerings.
Every construction business can benefit from a business plan, whether you’re established or just starting. A construction business plan can help you secure funding, document your business model, forecast future business demands, and function as a guiding light for you and your team.
The benefits of having a construction business plan
Most businesses start with a business plan—it’s a natural way to get your thoughts onto paper and organize them into actionable steps. Business plans can take a lot of time, but when done right, your business plan can function as your manual to move your business forward.
If you’re still unsure whether your construction business needs a business plan, these four benefits might help you decide.
Apply for funding
You’ll need a business plan if you’re looking for a business loan or planning to apply for business grants. Most financial lenders won’t even consider giving you a business loan without a well-thought-out business plan. A business plan is a way for lenders to gauge the risk level they’re taking if they lend your business money.
Your business plan should show lenders how to use their money and how to pay it back. It also allows you to build confidence in your ability to run a business from an organizational standpoint.
Attract top talent
Hiring the right people is important for any business, but it can make or break a construction business. Giving potential hires a complete understanding of your vision for your construction company can be the difference between finding the right employees versus the right now employees.
Creating a business plan will give you a clear vision for your company that you’ll easily be able to communicate to any potential hires.
Understand your competition
Industry and competitor research and analysis are a big part of creating a business plan. You might start your business plan thinking you know exactly what makes you stand out, but then again, you might not. Researching who your competitors are and what they do helps you solidify how your business can be differentiated from your peers.
Finding what’s unique to your business is a huge factor in outbooking other local construction businesses.
Gives you clarity
Trying to get your business off the ground can feel like you get lost in the weeds of it all. Creating a business plan can help you clarify key elements of your company. A business plan gives you the big picture and lets you identify the priorities and milestones you need to focus on for your business.
How to write a business plan for a construction company
Writing a business plan for your construction company is essential in building your business. Whether you’re looking for funding or you’re looking for clarity, a business plan can help set you on the right path. Here are six key components of a successful construction business plan.
1. Executive summary
An executive summary is an overview of your construction business plan. Think of it as the CliffsNotes version of your business plan—it gives readers the basics of your business’s goals, financial projections, strategies, and more. This should be the first section of your business plan, but it’s usually the last thing you write because your plan informs it.
An excellent executive summary reflects your construction business and should excite the reader about your company and its potential.
2. Company description
The company overview and description section is the second section in your construction business plan. This section outlines vital details about your company, like your location, the size of the business, what you do, and what you hope to do in the future.
When writing your company description, try to include the following information:
- The official company name
- Type of business structure (sole proprietorship, LLC, corporation, etc.)
- Names of the owners/management team
- The business location
- A company history that outlines when the business started, why you created it, and what it does
- Mission and vision statements
3. Market analysis
A robust market analysis gives you the foundation to create a strong construction business plan with the best chance at success. Market research is the best way to test whether your business will succeed. It can help you mitigate risks, give insights into customer preferences, and even help you decide on location and pricing.
There are two main types of market research: primary and secondary. Primary research is gathered directly from consumers—think surveys, interviews, and focus groups you administer. Secondary research is compiled from external sources—think government census data, polling results, and research conducted by third parties.
Both primary and secondary are great on their own; together, they’ll give you a fuller picture.
4. Operations plan
There are a lot of moving parts that go into running a construction business. The operations plan lets you lay out all those parts and explain how you’ll run your company. This includes everything from your physical location, facilities, staffing needs, and equipment you’ll require. You can outline the types of projects your construction business will undertake, how many projects you’ll take on at once, and what resources you’ll need to deliver quality service at that scale.
5. Marketing and advertising strategies
Use the marketing and advertising strategies section of your construction business plan to highlight how you plan to promote your business. This section can outline all of the strategies you plan to use and can include a rough budget of what you plan to spend on marketing and advertising. Consider social media , digital marketing, content marketing, SEO, and local marketing strategies.
6. Financial projections
The financial projections section includes details about how you’re funding your business, projected revenues and expenses, and profitability projections. Accurate financial projections give potential lenders and investors confidence in your understanding of the industry and the viability of your business.
Quick tips for writing a construction business plan
Now that you’ve got everything needed to start writing your business plan, here are five quick tips to help your writing process. These are big-picture ideas that you can use to get the most out of your construction business plan:
- Get to the point: Use clear, concise language to get your point across. Skip the jargon and ensure someone outside the construction industry understands what you write.
- Use data when you can: It’s great to have supporting data points to back you up when you’re talking about the industry and market.
- Write for your audience: Who are you writing for? Investors? Employees? Shareholders? Lenders? When you clearly define your audience, you can write in a way that resonates.
- Research, and then research some more: What you have to say about your industry is important, but having facts backed by research is even more powerful and convincing.
- Use it: Don’t let your business plan just be another PDF collecting metaphorical dust on your desktop. Use it to inform your decisions and guide you and your team through the years. And update it when needed!
Free construction business plan template
Ready to get started on your construction business plan? Our free construction business plan template can help you write a business plan with all the elements needed for success.
Download your free construction business plan template now
Build a better business with the right tools
If you know one thing, it’s that the quality of your tools can make or break a project. The same is true for the tools you use in your business.
With Homebase , you get everything you need to take control of your construction business . Built for teams like yours, Homebase helps you schedule your team , track their hours , and run payroll even if you’re all on different job sites.
Homebase is the all-in-one management app that simplifies running your construction business. Get started for free .
Construction business plan FAQs
Why should you create a business plan for your construction company even if you aren’t looking for financing.
You should create a business plan for your construction company even if you aren’t looking for financing, because it can help you understand your business and competitors and give potential hires confidence in your business.
What’s the best way to create your construction business plan?
The best way to create a construction business plan is to use a business plan template. You can download your free construction business plan template above.
Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.
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How to Write a Business Plan for Your Construction Company
What is a Business Plan?
- Executive Summary
- Company Description
- Market Research
Why Do You Need a Business Plan for Your Construction Company?
- Competition: The construction industry is very competitive. A business plan will help you research and compete against other construction companies in your area.
- Growth: A solid business plan will help you avoid stagnation by establishing clear milestones.
- Financing: Running a construction company is expensive . Every construction company will need to access funding at some point. A business plan will help you be approved for the financing you need to grow your business in the future.
1. Executive Summary
- Why you started your construction company
- What your goals are
- How your construction company fits into the market
- Where your plan to offer your services
- Projected profits and expenses
2. Company Description
- What are your major expenses?
- Who are your competitors?
- What is your specialty (i.e., commercial or residential construction)?
3. Market and Competition
- Who your competition is (similar construction companies to yours in your area)
- How you can compete with them
- Where the best location for your company is
- Who your target customers are
- How you meet your customers’ needs
4. Services
- Commercial building
- Design work
5. Marketing
- Marketing budget
- Social media
- Your website
6. Management
- Who your management is
- What each person’s role is
- How much each person is paid
- Why each person is valuable to your business
7. Finances
- Operating costs
- Employee wages
- Expected sales
- Expected profits
- Business expenses
- Financial projections
- How much funding you need
- What you need funding for
- How you can repay your loan
- How much funding you expect to need in the future
- How this funding will generate revenue for your construction company
9. Appendix
How to get a business loan for your construction company
Consider a Business Loan to Grow Your Construction Company
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1. Don't worry about finding an exact match
We have over 550 sample business plan templates . So, make sure the plan is a close match, but don't get hung up on the details.
Your business is unique and will differ from any example or template you come across. So, use this example as a starting point and customize it to your needs.
2. Remember it's just an example
Our sample business plans are examples of what one business owner did. That doesn't make them perfect or require you to cram your business idea to fit the plan structure.
Use the information, financials, and formatting for inspiration. It will speed up and guide the plan writing process.
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To create a plan that fits your needs , you need to know what you intend to do with it.
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But, if you don't plan to share your plan with anyone outside of your business—you likely don't need everything.
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How to Create a Business Plan Presentation
How to Write a Business Plan
Business Plan Template
10 Qualities of a Good Business Plan
How to Write a Business Plan for Investors
How to Start a Construction Business
Simple Business Plan Outline
How to Start a Business With No Money
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- Planning for Growth
Why a Construction Business Plan Is Essential — and How to Build One
- by Nancy Mann Jackson Nancy Mann Jackson is an ... more
- January 3, 2019
- 4 Minute Read
- Home > Blog > Planning for Growth > Why a Construction Business Plan Is Essential — and How to Build One
A construction business plan is crucial for successful business growth. If you’re running a construction company without a plan, you may not be building your business to its full potential.
Think about this: You wouldn’t undertake a new construction project without a written set of plans. The architect’s plans for a construction project allow you to see the potential end result and how to accomplish it. Similarly, a properly developed business plan allows you to see the potential results of your business efforts, and the steps you must take to achieve them. With its promise of attainable growth and success, a business plan can be a powerful document for your construction business.
What Is a Construction Business Plan?
A business plan is to your business what blueprints are to your construction projects. It’s a written document that outlines your business goals, the strategies you will use to reach those goals, and a timeline for reaching them.
Goals and strategies may be the most important (and actionable) parts of your business plan, but a properly developed business plan also provides an entire overview of your business, including its services, target market, employees, and finances. With that in mind, most business plans contain the following sections:
- Executive summary: A concise overview of your business plan and what it includes, as well as the purpose of the plan.
- Company description: A brief history and description of the nature of your business, including your company structure and the types of customers you serve or plan to serve.
- Products or services: A summary of what your business sells with an emphasis on the benefits provided to your customers.
- Market analysis: Information about your target customers, including the size and demographics of the groups you plan to serve. This section also includes a description of your industry and outlook, as well as information about your competitors.
- Strategy and implementation: An outline of your business goals and how you plan to reach them, including details about your sales and marketing strategy, costs and pricing, and any workers you’ll need to hire.
- Organization and management: An explanation of how your company is organized and led. This should include information about business owners or partners, as well as key employees, and construction project managers. It should also mention outside advisers, such as board members, accountants, and attorneys.
- Financial plans and projections: This section should include company financial information such as income statements, balance sheets, cash flow statements, and budgets for capital expenditures for the next few years.
Because a business continually changes and grows, a construction business plan is never set in stone. Instead, successful business owners revisit their plans on a regular basis to make changes and updates, setting new goals and devising new strategies for reaching those goals.
Why a Business Plan Matters
Maybe you’ve successfully operated your business for a year or more without a written business plan, so it doesn’t seem essential. Some businesses do experience startup success without this document, but a plan is necessary for business growth.
With a construction business plan in hand, you’re not simply shooting in the dark. You go to work each day with specific goals and strategic plans for reaching them. Your business plan can also help you make important financial decisions, like determining whether you need a construction business loan or construction equipment financing .
For example, if a project demands a certain type of equipment, you may be considering whether to purchase that equipment outright. But by referring to your business plan, you can determine whether that equipment will help you meet your business goals and whether the expense fits into your budget projections. If the equipment could move you closer to your goals but your budget doesn’t justify purchasing it outright, you may want to consider equipment financing.
In addition to helping you understand your business and providing a blueprint for you to follow, a business plan is also important to potential lenders or investors. If you plan to borrow funds or take on investors to help grow your business, you’ll need a detailed business plan to show them why your business is worthy of their attention.
Building a Construction Business Plan
If you’re wondering how to get started on your construction business plan, keep in mind that you don’t have to craft it all on your own. While you may be able to complete much of the document on your own, it’s wise to consult with your accountant, key staff and other advisers to ensure that you have all the right information to include.
For instance, your accountant can help you determine the company financial information that should be included and any financial forecasts . Your staff or consultants can help you establish the best strategies for meeting your revenue goals.
When building a construction business plan, discuss the following questions with your staff and advisers:
- Define your services: Does your business provide residential, commercial or industrial construction services? Do you focus on renovations? Are you a general contractor or a subcontractor?
- Determine your market: Who is your ideal customer? Where are they located?
- Set goals: What are your sales goals for this year? What about for the following years? Do you plan to continue selling the same products or services for the foreseeable future, or will you add new products or services to the mix? If you’ll add more, what will they be?
- Create a list of assets or needed assets: What equipment will you need to meet your goals? When will you need it?
- Examine your worker requirements: How many workers do you have now? How many will you need to reach your goals? How much will you pay them? Will you offer benefits? How does the construction labor shortage affect these worker requirements?
- Look at your competition: Who are your competitors? What are their strengths and weaknesses? How will you compete with them?
- Develop bidding procedures: How will you bid for jobs? How will you decide which jobs to bid on?
- Establish a marketing plan: What is your sales strategy? What are your sales projections?
- Determine your expenses: What are your annual expenses? Which ones are fixed and which ones could fluctuate? How much cash flow will you need?
When you and your team have answered all these questions, you’ll have the information necessary to craft a valuable business plan. Use the sections outlined above or organize the plan in a way that makes sense to you, and start using it.
Your plan can be a vital guide to meeting your business goals, but remember, it’s never truly complete. As your business goals and environment change, revisit and revise the plan to ensure it remains a living, viable document that can guide you on the path to growth.
Tags: Business Growth , Construction , Equipment Financing , Managing your Cash Flow , Marketing for Small Business
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How to Write a Construction Company Business Plan (12 Steps)
You are starting a construction business. You own a construction company. Do either of those statements sound like you? If so, you need a construction company business plan. Building a construction company is hard work, but you don’t reach success on hard work alone. You also need strategic planning, an in-depth understanding of the competition, and a way to finance your business. These are all things that construction business plans address. In this post, we take a deep dive into how to write a business plan for a construction company. Read on to learn everything you need to know.
Why Do You Need a Business Plan for Your Construction Company?
Before you get too deep into “how” to write a home-building business plan, it’s helpful to understand “why” you should write one. There are three main considerations here: competition, growth, and financing.
Competition
The 50 U.S. construction companies with the highest annual revenue all made more than $1.5 billion in 2020 , with the highest-grossing company topping $14.4 billion. This is the level thousands of construction companies in the U.S. and around the world are trying to reach, and the fight to get there is fierce. With that in mind, you need to understand your competition. This is a primary purpose of a construction company business plan. You probably already know who your competitors are, but you need to do market research and write it all down. A construction or general contractor business plan will force you to do that.
Like it or not, if you’re not growing, you’re more than likely dying in the construction industry. And your financial backers will want to see that you intend to grow. That means you need to have a plan for growth — how to achieve it and how to manage it when it happens.
How are you going to fund the expansion of your business? How will you get the initial capital to buy equipment? There are plenty of questions related to finances when you’re building a construction company. And any large or small construction company business plan will answer them and help you get the financing you need in the process.
Two Types of Information to Include in a Construction Business Plan
The information you include in your commercial or residential construction business plan will fall into two categories: industry information and general business information. Both are important to your business for different reasons. Perhaps the most important reason to include thorough information in your business plan is that it demonstrates your knowledge of the industry and business in general to the investors and banks who will read the plan when considering you for a loan. See below to learn more.
Industry information:
What do you know about the construction industry that others don’t? In other words, what makes your approach to your construction business different from the rest? This is what investors in your business will want to know as they try to gauge your chance of success. Don’t rely on empty buzzwords here — words like friendly, service, reliable, and the like. These are fine words, but you need to be more specific. How does what you know about the construction industry make you capable of running a successful construction business? Make sure those points are clear in your construction company business plan.
General business information:
In addition to your expertise in home building, you need to demonstrate some knowledge of general business practices. That means construction business plans need to have detailed information on the basic running of the business, the plan to get construction jobs, cash flow, corporate taxes, and similar items.
How to write a construction business plan
A business plan for a construction company is not a single page of text. It’s a complex, multi-part document that requires a lot of information. While not all construction company business plans are the same, most of them have a similar format. They include 12 key sections, which we explore in more detail below.
Executive Summary
Your executive summary is your introduction. It needs to summarize the rest of the document but not go into too much detail. Try to limit the executive summary section to a single page if at all possible, and cover topics like the following:
- The reason you are starting a construction company
- Your goals for the business
- Where you plan to operate and offer residential construction services
- Your estimated business expenses and profits
- How your home building business will fit into the existing market
Again, don’t go into too much detail here. The details will come later in the business plan. Just hit the high points.
Company Description
The second part of your construction business plan will echo some of the points you raised in the executive summary, but it will go into deeper detail. In the company description section, the takeaway point for a reader should be why you think your business will be successful. To that end, you need to describe any specialties you or your business partners have, any special positioning you can achieve within the market, and any revenue streams or reduced expenses that can make you more competitive. You will also need to describe the existing competition here. Who are your competitors, how successful are they and why do you expect to outperform them? These are all questions your company description should answer.
Operational Plan
You will get into even more detail in this section. But instead of focusing on who you are and what your business will be, you will use the operational plan section to describe how your business is going to run day in and day out. You’ll need to cover a few key areas: Technology: List and describe the pieces of technology and equipment you will use in the operation of your construction business. This can include initial construction equipment purchases and office technology like computers, programs, and even home design software .
Bidding processes: How do you plan to bid on residential construction jobs? This is an important part of generating revenue for your construction company, so it needs to be described in detail in your business plan.
Production schedules: When you get a home-building job, you are instantaneously on a tight schedule. As you know, it takes a lot to take a home from paper to real life, and the logistics behind that process are complex and unforgiving. So, make sure your business plan demonstrates your knowledge of production schedules and, more specifically, how you plan to structure your company’s production schedules.
Inventory partners: Being willing to build homes is one thing, but having the right partnerships in place to get the job done is entirely another. Which vendors and suppliers will you work with? Why? Do you have any existing relationships that could prove beneficial to your business? Answer these and any related questions in your operational plan.
Market and Competition
You’re probably not going to be the first construction company in town. Who else is already established in your intended service area? How successful are they? Your construction company’s business plan needs to contain an in-depth analysis of the competition you’re going to face, as well as the market for residential construction services in the place you plan to operate. The reason why is simple. You need to know who your competitors are so you can see what they’re doing and look for ways to grab some market share from them. And you need to know whether people want the service you are going to provide. This section will cover all of that — for both your knowledge and that of your financial backers.
Construction is a service, but it contains within it multiple related services that you can choose to offer or not offer to your customers. This is going to be an important part of your business plan — starting a construction business without a list of services you will provide is like opening a store without knowing what you’re going to sell inside it. So, make a list. Here are some of the construction-related services you may want to consider:
- Residential construction
- Commercial construction
- Home design
- Landscape work
Sales & Marketing
You may not be a marketer at heart, but you’re going to have to have a plan to market your construction business and bring in home-building jobs. The sales and marketing plan you write in your business plan should be as detailed as possible. Include information on the following subtopics:
- Your marketing budget
- Your company’s marketing assets, such as a website
- Advertising plans (such as billboards, newspaper ads, and search engine advertising)
- Whether and how you plan to leverage social media
- Loss leader plans, such as offering free home design consultations
- How you will measure the success of your marketing efforts
In addition to marketing, this section of your construction company business plan will need detailed information on your sales processes. Will you have dedicated salespeople? How will your sales team get leads? Will salespeople be paid on commission? Answer these questions and more.
Managers can make or break a construction business. These are the leaders of your company — the ones who will define the path your business follows and bear the responsibility for the successes and failures you have along the way. That’s why this is an essential part of your home-building business plan. Management may shift over time, but at the start, you need to have a good idea of who’s going to be in charge of what. You will also need to include an explanation of why you have chosen these people, who they answer to, and what you are planning to pay them.
For financial backers, this is going to be one of the most important sections of your business plan. They want to know how you plan to manage the money they may give you so they have an idea of whether this is a sound investment. Give them as much detail as possible. Cover everything from your revenue projections and operational costs to employee wages and the price of your services. Wherever possible, you need to include exact figures based on hard data and research instead of soft estimates based on your own beliefs. Remember — lenders and investors have a head for numbers, so they will immediately notice if you’ve left something important out.
The funding section of a business plan for a construction company is an extension of the finance section, but it’s not the same thing. This is where you describe how you plan to obtain the money you need to start, run, and expand the business. The audience reading your business plan will hopefully play a part in the funding — that’s the whole idea, anyway — but you need to convince them that you will be able to use their funds wisely to generate revenue. Be specific about how much startup funding you’re going to need and why. Go into detail about how you will repay a loan or generate returns for investors. Describe how initial funding will be used in your business — to buy equipment, hire talented employees, market your business, and so on. With these bases covered, you will set yourself up to receive the funding you need to get this business off the ground.
Financial Projections
You’re hoping for a bright future for your new construction company. That’s a given. But you need to show that bright future with the financial projections in your business plan. Include projections for revenue, expenses, and profits for five years out from your starting date. Don’t just say you plan to bring in $100 million by the fourth quarter of year three — show the numbers behind how you’ll get there. You will be able to reference the information from the other sections of your business plan to support your projections.
Funding Request
If you need investments or a loan to start your construction business, you need to include in your business plan a specific funding request. This is where you ask for the money you need. Here again, you need to provide some detail:
- How much money do you currently have for the business?
- How much are you contributing alongside the investment or loan you are seeking?
- What assets do you already own, and what assets do you still need to acquire?
Many of the facts and claims you have made in other sections of your construction company business plan will have supporting information or related documents that won’t quite fit. The appendix is where you include those references. Any extra information that could help financial backers understand your proposed business should be included here. And don’t worry — this section will not likely be read in its entirety, so you can include everything. In general, more information in a business plan is better than less.
Final Thoughts
Writing a construction company business plan is a big task, but if you break it down into small steps, you can get it done. From the executive summary to the appendix, your business plan needs to demonstrate your ability to achieve success in the residential construction industry. With your business plan written and your company started, you’ll need to get home-building jobs and please your clients. Cedreo can help with that. Our home building software can help you quickly create 3D home designs to help clients visualize the project and make them much more likely to close the deal with you. Interested? Learn more about our home building software here, or contact us for more information.
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Construction Financial Management in 2023: The Ultimate Guide
Is financial management a big challenge for you? Well, you're not alone, and that's where Archdesk can help you.
Do you feel your techniques and tools for construction financial management aren't enough?
Do you sometimes go over budget due to poorly estimated project costs?
Do you face problems with managing your company's cash flow?
You're not alone in those challenges.
In this guide, you'll find answers to the most common questions with tips and best practices that will help you ensure your company's financial safety.
What is meant by construction financial management?
This is how managing your construction finances looks inside Archdesk
Construction financial management is allocating and accounting for financial resources to cut project costs, maximise profits and assure long-term company financial health.
Every decision impacts your financial position. That's why in proper financial management, every process matters, from small purchases to structural changes on a business level.
Yet, to be able to analyse your situation, you need to gather, organise and learn how to manage financial data.
The importance of doing construction financial management right, with no workarounds
Workarounds might be a good solution for managing risks or unpredicted changes. But, basing your whole construction project's financial management on them is not a good strategy:
Waste of your time and energy
Building workaround spreadsheets every time costs you time and energy. After all, you must take the financial data from a primary source, create a workaround and manage the information.
In the 21st century, construction companies must be fast and efficient to stay on the market.
If you spend your time creating contemporary worksheets, you have no time left for actions that matter- like winning more businesses.
Lack of complete financial overview
Workarounds for many construction managers seem to be a faster and cheaper way of managing finances. Especially when the alternative is a pricey system.
They don't see that operating only on workarounds is the nail in the coffin rather than the key to success.
With many detailed worksheets, you lack the crucial aspect: an overview of the company's financial health.
You can't see how decisions impact your company which means you have zero control over what's happening with your business.
Higher risk of manual errors
Did you know there's a 40% chance of committing an error while manually entering data into spreadsheets? The risk reaches 100% if you deal with complex files.
Still, many construction companies manage their finances only in spreadsheets.
The human eye cannot catch an error in loads of financial data. That's why putting all your financial management on manual work is doomed to fail from the beginning.
Knowing where the money is going and how to allocate that money will separate a good construction manager from a great construction manager. - Damen Edwards from Construction Management Podcast
What makes construction financial management different from the financial management of companies outside the construction industry?
Standard accounting systems can’t handle construction financial processes
Most industries operate on annual reporting. The construction industry is much different. Construction projects last even up to 10 years (or even longer) and can be fully billed only after the end of the execution.
Because of that, a typical accounting system isn't always a good fit for a construction company.
If an accounting system operates on 365-day financial reporting, it might cost you too much time, effort, and money to adapt it to your specific needs.
Each construction project requires a separate estimation
Unlike many other industries, construction is project-oriented. It means that project cost changes every time (even if it's the exact scope of work). Weather conditions, localisation, or contractor's terms are only a few variables that impact your project management.
If main contractors don't want to underestimate costs and risk overspending, they must consider all the financial aspects while creating a proposal. It means they must already spend time and effort before even knowing they got the job.
Construction payable is much more complex
Payment terms on construction contracts vary a lot depending on the construction branch. Along with them come different types of financial reporting, budget control techniques, or strategies for measuring financial progress.
Such a situation is challenging for all participants in a construction act. From a contractor's perspective, he has to adapt to multiple construction contracting methods, which makes financial management much more demanding and complicated.
If you try to run the building business books the same way as most other businesses, you are always going to be coming up with a picture that is not accurate. There are some unique elements in the construction industry that if you don’t take them into account, you end up with a problem. - APB’s Head Coach, Andy Skarda, in Professional Builders Secrets
Top 3 construction financial management challenges
No real-time view of project costs and their impact on project financial health
Many project managers don't know if their project is profitable till the very end of the execution. They can't see where and why they are losing money. It's a common but severe mistake for the company's financial health.
The reason for that isn't a lack of financial data. Instead, it's due to a lack of techniques and tools to analyse them. As a result, construction managers don't have any possibility to react when a risk occurs.
Difficult cash flow management- payment terms in the construction industry
Cash flow management is a nightmare for many construction companies.
The average time to get paid is 60 days, while even one in five subcontractors must wait up to 90 days. With such conditions, it's incredibly challenging to plan future investments and not stress about financial stability.
Payment terms are not the only challenging aspect of financial management. Companies also have to deal with low-profit margins and a lack of regular income (usually at the project's beginning or end).
The complex reality of financial data
Project management success in the construction industry depends heavily on external factors. Even if a company invests time and effort to prepare the most accurate estimation, the situation of the project can change at any time.
The leading external financial challenges for construction in 2023 are inflation and material supply chain problems. They hit companies' financial stability heavily, taking cash flow levels necessary to survive in the market.
Who is responsible for construction financial management in a construction company?
Business Owner
The Business Owner is usually responsible for managing financially small and medium-sized businesses. He’s the main person in charge of making financial decisions, executing construction contracts, and sometimes even the tendering process.
CFO (Chief Financial Officer) is a professional dealing with strategic financial management in larger companies. Along with the CEO, he’s focusing on a broad perspective and long-term growth path.
Financial Manager
The Financial Manager is often confused with the CFO position. While the scope of work might seem similar, construction financial managers focus more on daily operations and implementing financial strategy from the board.
Project Manager
The Project Manager is the primary person responsible for the financial management of a project. To deliver a construction project, he must be familiar with techniques for managing risk, financial reporting, and progress monitoring.
Accounts Payable
The account payable clerk provides financial, administrative, and payment support for a construction company. He's responsible mainly for verifying invoices, running subcontract accounts, and making interim payments.
Quantity Surveyor
A Quantity Surveyor is a professional dealing with financial and contractual aspects of construction projects. With extensive practical knowledge, he controls project execution and advice on the better allocation of financial resources.
How to choose construction financial management software?
Construction management software can be a great support in making financial decisions. When reviewing available options on the market, focus on the following features.
The budget is the core of any construction project management. Good management software should provide a real-time view of your project's execution. It means showing you how your project is doing at each execution stage.
Thanks to that, you will be able to track financial progress and make decisions using complete data you can trust. Also, you'll be able to react faster in case of sudden change and save your work from a financial fiasco.
The financial dashboard should be a primary source of information when managing your project's financial health.
Procurement
Organised procurement is a must for the financial health of your construction company. Especially nowadays, when the materials' prices are constantly growing, unplanned purchases might undermine your financial stability.
That's why you must search for software with a procurement solution that gives you complete visibility over the company's purchase orders.
Thanks to that, you'll be able to communicate with suppliers faster and decrease the risk of project delays.
With all the purchase details stored in one place, you can rest assured of timely delivery and no risk of overspending.
Estimation & Quotation
Don't let your construction project be one of the 39% that fail. Choose a construction management software that can improve and streamline your estimation process.
Check the features carefully and invest in a tool that can tailor to your process of creating pricing documents.
With customised options, you'll be able to speed up the estimation & quotation process while earning the most possible from your future projects.
A management tool that can mirror your company’s structure and customise it to your financial processes will be a real support in project management.
Best tools for construction project financial management
Xero is accounting software for small businesses, accountants, and bookkeepers. It provides solutions for tracking and paying bills on time, financial reporting, and seamless connections with bank accounts.
Xero is a good choice mainly for the accounting department and employees working with invoices, payments, or financial documentation.
At the same time, it's essential to remember that Xero works according to accepted accounting practices. It means that it's not able to address financial challenges specific to the construction industry.
So, before investing, check out which construction management systems can integrate with Xero.
Spreadsheets
Good old Excel Spreadsheets. They are the most common (and free) tool for managing financial data. Yet, they aren't a perfect solution.
If you want to improve your financial management and ensure the company's financial stability, excel spreadsheets aren't enough.
They lack an overview of the company's financial position and have a high risk of manual mistakes while entering data.
However, Excel can be a great addition to proper construction software.
For example, you can import/export data from the software to a spreadsheet and send it to an external client while not risking any data loss.
Archdesk is a business management platform that solves construction-specific finance challenges.
In the software, your construction data are visible in clear, easy-to-read dashboards, giving you complete control over project execution.
You can plan, manage and track the allocation of your resources as financial dashboards update whenever a new expense is added.
Also, the software integrates with the most popular accounting systems (like Xero or Sage50). So, you can perform entire accounting processes without fear of data loss or manual errors.
Level up your construction financial management
Managing finance in construction is not easy. To assure the financial health of your business, you must:
adapt to the specifics of the construction market (payment terms, low margins, lack of regular income)
be aware of internal and external challenges for your project management, like growing costs of construction materials
spend a lot of time on the estimation process while at the same time being flexible about possible changes in the project's execution
Luckily, you're not alone in this challenge. With proper construction tools, you improve financial health and assure the company's financial stability in the long run.
Karolina Dobrowolska
Content Marketer
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Construction Company Business Plan
Growing a construction company is much more difficult and taxing than completing projects.
From acquiring a new project to meeting deadlines, managing the budget, and many more things in between- you will find yourself drowning in responsibilities when you start a construction company.
A construction business plan can come to your rescue in such burdensome situations. If prepared well, it can become a reference point for your company as it continues to grow.
Confused about how to write a business plan?
Well, this article will serve you perfectly. It will help you understand the contents of the business plan and offer a sample template for your construction company.
So let’s build a solid construction company business plan with this detailed guide.
Let’s dive right in.
Key Takeaways
- Venture into the market by conducting thorough industry and market analysis.
- Widen the scope of your service offerings to cater varying needs of your target audience.
- Create a detailed operations plan to get thorough guidance in your business operations.
- Conduct a SWOT analysis to identify your competitive edge over the competitors.
- Determine your marketing strategies to launch your business and get it popular amongst your target market.
- Define your business objectives, goals, and mission values to create a foundation for essential business policies.
- Account for various project costs, operating costs, and office expenses to form realistic cash-flow projections.
Why do you need a construction company business plan?
Apart from the fact that investors and banks would ask for a business plan when you seek funding, here are a few more reasons you need a business plan.
- A business plan offers a roadmap to your business. It acts as a guiding block that has answers to all your how, when, where, and what.
- It helps in determining the exact target market for your business and formulating strategies to cater accordingly.
- There are millions of construction companies competing in the industry. You can identify your strengths through a business plan and design a competitive edge to stand apart.
- A well-rounded plan prepares you for emergencies that may arise in your business by making a plan for every situation.
- A whole lot of business processes repeat every day. A business plan helps bring consistency by establishing SOPs for various business activities.
And of course, you get your desired funding with a solid business plan that vouches for the potential of your construction company.
Key components of a construction business plan
Writing a business plan gets much easier with a structurally defined flow. Well, let’s have a look at key components that a construction company business plan must have.
Executive Summary
A brief summary of an entire business plan that will encourage the readers to read further.
Company Overview
A brief company description including every detail from company structure to its mission statement and future goals.
Market Analysis
A thorough analysis of the construction industry and your target market. It also includes sections for competitor analysis, future market trends, and scope of growth.
Construction Services
Outline the construction services that your company will offer. Highlight any additional services that will make you a distinct player.
Marketing and Sales Strategy
It includes a strategic plan to achieve success through marketing and sales. Determine the best course of action for your business.
Management Team
Introduce key personnel in managerial and leadership roles. Discuss their roles, qualifications, experience, and expertise.
Operations Plan
A detailed plan that streamlines the everyday operations right from construction methods to hiring employees.
Financial Plan
A financial plan highlights the prominent figures and key reports of your construction company by making necessary financial projections.
Let’s dive further into these topics and get a detailed understanding of writing your business plan.
Related Construction Company Resources
- Construction Company Marketing Plan
- Key Stats for the Construction Sector
- Start-up Cost For Construction Company
- How to Start a Construction Business
A step-by-step guide to creating a construction company business plan
A poorly written plan serves no purpose. However, with this step-by-step guide, you will uncover every detail that goes into making a fantastic and purpose-serving business plan.
1. Get a business plan template
Writing a comprehensive business plan is taxing and time-consuming. But if you do it well, you will have a guidebook for running your construction company.
Now, there is a lot that needs to be considered, planned, and accounted for as you start writing the plan. Even if you closely follow a construction business plan outline, there are higher chances of you losing track or getting stuck at certain sections.
This is why you need a business plan template to give a solid structure to your business idea. With industry-relevant examples and a guide, the Upmetrics business plan template is easy to edit and customize.
Whether you own a general contracting firm or specialize in residential construction or specialty trades- we have plenty of construction-related templates for you to choose from.
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2. Write an executive summary
The executive summary is a concise yet insightful description of your entire business plan.
This one-page document summarizes the most important questions that a reader might have and offers a peek into what they are about to uncover. Investors take a brief glance at your executive summary before deciding whether to proceed further or not.
An executive summary must outline the following details of your construction business in persuasive consecutive paragraphs.
- The exact business opportunity
- The target market
- The problem and the solution to it
- Products and services offered by you
- Market size and growth potential
- Financial highlights
- Management team
Maintain a personal storytelling tone while writing this section and encapsulate every minute detail that can make a difference.
But wait, don’t start writing yet. Write your executive summary only after you are done writing an entire plan. This will help you summarize effectively.
3. Prepare a company overview section
This section of a business plan will focus entirely on the details of your construction company.
From the type of construction company to the construction company’s goals- everything in this section is about your company description.
To begin with, highlight the type of construction business you will start. For instance, a residential construction company, general contracting company, industrial construction company, or specialty trade construction.
Clarify, if this will be a new business or an extension of existing business. If the business is already operating, offer a brief description of the business history.
After that, highlight the business structure of your construction company. Are you going to be a sole trader or start a limited liability company (LLC) or a limited partnership firm? The business structure you choose will decide how the finances and taxes will work in your business.
Now, this section is your chance to weave magical stories around your construction company. Present the mission statement, company’s objectives, and future goals over here.
For instance,
Mission statement : Syncore aims to become a trusted name for sustainable residential construction projects in Arizona by 2028. With our commitment to the highest quality standards, we will penetrate the market with our premium budgeted solutions.
Business goals :
- Onboarding and signing 15 construction projects in a span of 6 months.
- Generating revenue of $2 million by 2025.
Like this, you will write this entire section in parts by offering a brief overview of your construction business.
4. Conduct a competitive and market analysis
In this section of a business plan, you begin with industry analysis and then narrow it down to your particular market segment. This is important to show your potential investors that there are promising opportunities in this market.
Using market research practices determine the target market for your construction business. Create a buyer persona to identify what your ideal customer will look like.
Further, highlight your competitors in this competitive construction industry. Using SWOT analysis and PESTEL, determine the strengths and weaknesses of competing construction companies. In this section, you will also highlight your strengths to gain a competitive edge over existing players.
Don’t limit your market study to merely understanding the current scenarios. Extend the research and identify future trends and growth possibilities in your targeted market.
If you are a residential construction company focused on sustainable building practices, you must include the following details in your market analysis section.
- How large is the construction industry?
- What segment of the construction market will you capture?
- Who will avail of the construction services?
- What is the spending capacity of your target customers?
- Who are the top competing construction companies?
- What are the emerging trends in the industry and how will you leverage those?
- What is the growth potential of your target market?
Focus on quality market research as this will form the base of your further projections and strategies.
This screenshot of the construction business plan example highlights only the market size for HDFL construction. You can also include details like competitors analysis, growth potential, and market trends here.
5. Describe your construction service offerings
What construction services will you offer your potential clients?
Offer a detailed answer to this question, as you write a business plan section for service offerings.
Overall, this section should highlight every service offering that will bring you money. This could include services like,
- General contracting services
- Design and Engineering
- Construction
- Renovation and remodeling
- Project management
- Specialty services i.e. concrete work, HVAC installation, Roofing services
- Maintenance and repairs
Offer a brief understanding of these service offerings and highlight construction jobs you will specialize in. For instance, remodeling of kitchen and bathroom.
Now, will your construction company sell any construction materials for profit? If so, include details for that as well.
It’s important to consider the breadth of your service offerings to keep the customers coming back.
Overall, this section is your chance to prove to potential investors that your services can stand solid in the competitive construction industry.
6. Propose marketing and sales strategies
According to the IBIS world report , there are more than 3,787,470 construction businesses in the USA. Starting a construction company will add one more to this list, but hey- How do you wish to make a brand that your target audience can recall easily?
All the market assessment and understanding of your potential clients will come in handy at this stage as you make your marketing plan and sales strategies.
Take an opportunity to lay out your sales plan in this section. If you have existing customers, explain how you plan to retain them.
After you are done making your sales strategies, touch the marketing aspect.
Firstly, identify the way you want your brand to be recognized- as an ordinary construction firm, a luxury construction company, a sustainable solutions firm, or an affordable construction company. This will help you make a marketing plan.
Your marketing strategy should answer the following questions:
- Which marketing channels will you use- Online, offline, or a mix of both?
- How will you generate more leads?
- Online marketing methods- search engines, social media, Email marketing, content marketing, etc.
- If you are going to be utilizing social media platforms- which ones?
- How much will you budget for paid ads?
- Will you use billboards, pamphlets, and newspaper advertisements to market your business?
Keep in mind the marketing channels where you can find your potential customers. For instance, you are more likely to find conversions through Email campaigns than social media campaigns, if you are finding clients for commercial construction.
All in all, in this section you have to draw potential investors’ attention with your sales and marketing strategy.
7. Introduce your management team
Everyone is aware of the cutthroat competition in the construction industry. Knowing that you need an able team to transform your business plan into a successful venture.
After laying out your marketing strategy, it’s time to introduce the key management and leadership team to your business plan.
It’s okay to brag about the talented individuals you have in your company. From construction heads to project managers, highlight the achievements, experience, and expertise of these people and prove their asset-worthiness for your company.
Also, draw the hierarchical map to give potential investors an idea of your organizational structure.
This is your time to prove that you have both the means and manpower to run a successful company.
8. Outline your operational plan
You may know construction, but do you know how to run a construction business?
As someone said, “ Seamless operations are the silent engine of extraordinary business achievements”
Before even taking the first project, it’s important to define operations and SOPs for different business activities. Make it so thorough that it can act as a guidebook whenever a problem arises in your construction company.
As you write a business plan for this section, focus on answering the following questions:
- What construction materials will you use?
- What will be the supply chain process in your construction company?
- Who will oversee the project management on site?
- What will be the timeline for completing projects?
- What will be health and safety protocols for construction workers?
- What will be the process of construction work?
- How will the communication flow within an organization?
- What technologies and equipment will you use?
- How will you ensure quality work?
- How will you hire employees?
- What accounting software will you use?
This is just a general gist of questions that can help you prepare this section. Consider it as a living document that will undergo various changes as the business commences and grows.
A thorough operations plan will lay a clear groundwork for running a company. Moreover, it will instill investors’ faith in your ability to run a construction company.
9. Create a financial plan
Writing a sound financial plan is a challenge but nothing that your determined mind can’t handle.
Whether you plan to raise funds or get bank loans, you need a sound financial plan. Investors will analyze this section and only if they find your business financially viable, will they invest.
In this section, you will make financial projections and estimates for your construction company. This includes forecasting sales, estimating startup costs , projecting overhead costs, and making a pricing plan.
Using the startup costs projection, determine how much funding is essential to start your own construction company.
Also, prepare different reports like income statements, cash flow statements, balance sheets, and break-even analyses using the projections made earlier.
To make a financial plan more relevant, consider various progressive and aggressive situations.
Lastly, prepare graphs, charts, and diagrams to make this section visually appealing and easy to grasp.
Now, stop. Don’t start writing a financial plan yet. You need a financial forecasting tool from Upmetrics to help you with projections and calculations of cash flow, sales, revenue, and everything else. Simply enter the data and it will make detailed and precise calculations for you.
Trust us, you don’t want to scratch your heads writing the entire plan from ground level.
And that’s it! With all this information you pretty much know everything that a construction business plan must have.
Construction Industry Highlights 2023
Now that you are almost set to open a construction company, here are a few industry statistics that might interest you.
- Market size : The US construction market sector was valued at 1.8 trillion US dollars in 2022.
- Growth of the virtual construction market : The global BIM market is 7.9 billion US dollars . North America is projected to be a market leader capturing 30% of this market.
- Rise in prefabrication and modular construction : Healthcare facilities followed by hotels/motels and educational institutions are most likely to avail of modular construction facilities.
- Major concerns : The leading concerns encircling the construction industry are inflation and supply chain disruptions faced by nearly 90% of constructors.
- Sustainable and green building : There is a continuous increase in demand for sustainable and green building solutions. As for 2021, the green building market in the USA was reported to be approximately 83 billion dollars .
- Growing investment in smart cities : According to IDC, the investment in smart cities is expected to grow to 203 billion dollars by 2024.
From sustainability to tech-centric processes, the construction industry is making huge shifts in trends. Both, small businesses and large have to evolve according to changing times to keep themselves relevant.
Download a sample construction business plan
Facing difficulty writing a business plan? Well, we have a perfect resource for you.
Download the Upmetrics sample business plan template. Our template offers step-by-step instructions and prompts to ease the entire plan writing process. It’s designed to meet modern market needs and is perfectly detailed with construction-relevant examples.
The Quickest Way to turn a Business Idea into a Business Plan
Fill-in-the-blanks and automatic financials make it easy.
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A lot of us struggle when it comes to translating our ideas into a solid business plan. But not with Upmetrics.
Upmetrics is an intuitively designed business planning app with more than 400+ sample business plans . Our business planning tool features AI assistance that will transform your business writing process. Not only that, it allows you to design, collaborate, and share your business plan in real-time with your team.
So what are you waiting for?
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Frequently asked questions, what kind of market research should i include in my construction business plan.
The market research for your construction business plan must include the following details:
- The market size of your targeted market, i.e. commercial construction, residential construction, etc.
- The target audience of your services and their buyers’ persona
- Top competing firms and companies offering similar services
- Emerging trends in your market
- Growth potential for your firm
Is a SWOT analysis necessary for a construction company business plan?
Absolutely yes. There are more than a billion construction companies in the USA itself. Starting another business won’t guarantee success unless you have a business that can withstand the dynamic competitive environment. SWOT analysis will make you aware of the company’s strengths, weaknesses, and the opportunities it can avail
What are the initial startup costs for a construction company?
It is possible to start a construction company with as little as $10,000. However, if you plan to set up a mid-sized construction company, expect to spend anywhere around $50,000-$250,000 on getting a basic setup. This includes accounting for licenses, insurance, office setup, construction materials, and payroll for the initial months.
Can I get government grants for a construction business?
Yes, you can apply for government grants to start your construction business. Check the local, federal, and state regulations to see which grants are applicable to your business. Check the eligibility and apply accordingly.
How often should I update my construction business plan?
A business plan is a living document that can guide you toward success if mapped properly. Ideally, you should update your business plan every 4-6 months to make it relevant. Set aside time to do so as a renewed plan will offer deep and meaningful insight into your business goals.
About the Author
Upmetrics Team
Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more
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BUSINESS STRATEGIES
How to create a construction business plan
- Jeremy Greenbaum
- Sep 7, 2023
When it comes to starting a construction business, a strong foundation is everything. Just like laying the groundwork for a sturdy building, creating a business plan acts as the bedrock for your business's future success.
A construction business plan is a document that outlines the goals, objectives, strategies and operational details for a construction company. It serves as a roadmap to guide you and your stakeholders through the process of starting a business in the construction industry.
By systematically detailing the elements of your business, a construction business plan provides a clear and organized framework for achieving success in the competitive construction market.
Need a way to get your construction business online? Make your website with Wix’s website builder .
Crafting a thorough construction business plan is crucial for establishing a clear path and securing the success of your venture. Here are the six key components of a construction business plan:
Executive summary
Business name and domain name
Market analysis and research
Operations plan, marketing and advertising plan, financial plan, 01. executive summary.
The executive summary is a concise overview of your entire construction business plan. It provides readers with a snapshot of your company's goals, strategies, market positioning and financial projections. While placed at the beginning of the plan, it's often written after the rest of the plan has been developed. A clear executive summary should capture the essence of your construction business and pique the reader's interest, encouraging them to delve deeper into the plan.
Example of an executive summary for a construction business: "Construction Innovators Inc. is a forward-thinking construction company specializing in sustainable building solutions. With a commitment to quality, innovation and customer satisfaction, we aim to revolutionize the construction landscape. Our expertise ranges from residential developments to commercial spaces, offering eco-friendly designs that meet modern demands. By leveraging cutting-edge technology and a skilled workforce, we're positioned to drive industry advancements while achieving substantial growth. Through strategic partnerships and a customer-centric approach, Construction Innovators Inc. is poised to create a lasting impact in the construction sector."
02. Business name and domain name
Selecting the right business name is crucial for establishing a strong brand identity in the construction industry. A memorable and relevant name can build trust and recognition. Similarly, choosing an appropriate domain name for your business website is essential for online visibility. To generate name ideas, consider using business name generators , incorporating industry-related terms or creative words that reflect your company's values.
Be inspired: Construction business name ideas , Contractor business name ideas
When choosing a domain name , ensure it's easy to spell, memorable and closely related to your company name. Check for its availability and avoid using hyphens or complicated spellings. A well-chosen domain name contributes to your online credibility and enhances discoverability.
Once you’ve landed on a name, take the proper steps to register your business .
03. Market analysis and research
Incorporating a market analysis within your construction business plan is pivotal to understanding your target market, competitors and industry trends. Comprehensive market research helps identify gaps in the market, customer preferences and potential challenges. This knowledge forms the foundation of a robust business strategy that positions your construction company effectively.
04. Operations plan
The operations plan outlines the practical aspects of running your construction business. This section details the physical location, facilities, equipment and staffing requirements. For instance, specifying the type of projects you'll undertake, the scale of operations and the necessary tools and machinery highlights the resources needed to deliver quality services.
05. Marketing and advertising plan
A well-defined marketing and advertising plan is essential for promoting your construction business. Consider strategies like digital marketing, social media engagement, content marketing and attending industry events to showcase your expertise. Tailor your campaigns to showcase your projects, expertise and commitment to customer satisfaction. Building a positive online reputation and leveraging word-of-mouth referrals are key components of marketing a construction business.
Remember that no matter how you choose to promote your business, you’ll want to maintain a consistent brand image. Think about what steps you need to take to build up your visual identity; check out these construction logo ideas and try a logo maker .
06. Financial plan
The financial plan outlines the monetary aspects of your construction business. It includes details about how you plan on raising money for your business , projected revenues, expenses and profitability timelines. Make sure to define how your construction company will be initially funded, whether through personal investment, loans or investors. Accurate financial projections demonstrate your understanding of the industry and reassure stakeholders about the viability of your business.
A well-structured construction business plan like the one detailed above will provide you with a comprehensive roadmap for launching and growing your construction business successfully. Each section is necessary and contributes to your holistic understanding of your business's vision, strategies and potential for success.
Construction business plan examples: InnovativeBuild Solutions Inc.
InnovativeBuild Solutions Inc. is a dynamic construction company poised to transform the industry through cutting-edge technologies and sustainable practices. Our mission is to redefine construction by delivering innovative, eco-friendly solutions that meet modern demands. With a team of seasoned professionals and a commitment to excellence, we're confident in our ability to leave a lasting mark on the construction landscape. From residential projects to commercial spaces, InnovativeBuild Solutions Inc. is dedicated to shaping a more sustainable future.
Company name and domain name
Company name: InnovativeBuild Solutions Inc.
Domain name: www.innovativebuildsolutions.com
Market analysis: Through thorough research, we've identified a growing demand for environmentally-conscious construction solutions. Our target market includes forward-thinking homeowners, businesses seeking sustainable spaces and local governments promoting eco-friendly infrastructure.
Competitive analysis: We've assessed key competitors in our region, analyzing their strengths and weaknesses. This research allows us to identify gaps in the market and opportunities to differentiate ourselves.
Location: InnovativeBuild Solutions Inc. will be headquartered in a strategic urban location that offers easy access to construction sites and client meetings.
Premises: Our office space will be designed with sustainability in mind, incorporating energy-efficient features and eco-friendly materials.
Equipment: We'll invest in state-of-the-art construction equipment to ensure efficient project execution and maintain high standards of quality.
Staffing: Our team will consist of experienced architects, engineers, project managers and skilled laborers who share our passion for innovation and sustainability.
Digital marketing: We'll leverage digital platforms to showcase our projects, share industry insights and engage with our target audience. Social media, content marketing and email campaigns will be integral to our strategy.
Networking: Participating in industry events and local networking opportunities will help us establish connections and build relationships within the construction community.
Project showcase: Our website will feature a portfolio of completed projects, highlighting our expertise and the value we bring to clients.
Initial funding: We will secure a combination of personal investments and a small business loan to cover startup expenses, equipment purchase and initial project costs.
Projected revenues:
Year 1: $800,000
Year 2: $1,200,000
Year 3: $1,800,000
Expenses: Operating expenses, employee salaries, material costs and marketing investments have been carefully estimated based on industry standards.
Profitability: We aim to achieve profitability by the end of Year 2, driven by increased project volume and strong client relationships.
Benefits of creating a construction business plan
Creating a comprehensive and clear construction business plan is of paramount importance when starting a business. This plan acts as a foundation upon which all activities and decisions are built, fostering a focused and well-structured approach. It offers several key benefits:
Clear vision: A well-defined business plan will help you clarify your vision for your company. It outlines the company's mission, goals and values, providing a cohesive and unified direction for the entire team.
Strategic decision-making: The plan serves as a strategic tool that assists in making informed decisions. It allows you to anticipate challenges, assess risks and identify opportunities within the construction industry.
Resource allocation: A comprehensive plan provides insights into the required resources, both financial and human. This helps in budgeting, estimating costs and allocating resources efficiently.
Target market: Through market research and analysis, the plan outlines the ideal target market and customers. This understanding enables tailored marketing efforts, leading to better customer acquisition.
Competitive edge: A thorough analysis of competitors and the market landscape allows you to identify gaps and opportunities that can be exploited for a competitive advantage.
Funding: When seeking funding from investors or lenders, a well-structured business plan demonstrates the viability and profitability of the construction business. It instills confidence and attracts potential financial support.
Long-term growth: By outlining strategies for business growth, the plan provides a roadmap for expansion, diversification and adapting to evolving industry trends.
Regardless of what type of business you’re starting, it’s essential to incorporate a business website into your plan. A website acts as a virtual storefront, showcasing your company's portfolio, services and testimonials. It enhances brand credibility and accessibility, allowing potential clients to learn about your business and contact you easily.
Learn more: How to make a construction website
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How to create a financial forecast for a construction company?
Creating a financial forecast for your construction company, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your construction company is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
In this guide:
Why create and maintain a financial forecast for a construction company?
What information is used as input to build a construction company financial forecast, the sales forecast for a construction company, the operating expenses for a construction company.
- What investments are needed for a construction company?
The financing plan of your construction company
What tables compose the financial plan for a construction company.
- Which tool should you use to create and maintain your construction company's financial projections?
- Financial forecast template for a construction company
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your construction company becomes handy.
Creating a construction company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your construction company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a construction company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your construction company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
Need a solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
A construction company's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing construction company, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a construction company startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the construction company running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your construction company's financial forecast.
From experience, it usually makes sense to start your construction company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your construction company (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your construction company's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- The overall health of the economy can greatly impact the construction industry and thus your business's average price and number of monthly transactions. During times of economic growth, demand for construction projects increases, allowing you to charge higher prices and potentially increase the number of transactions. On the other hand, during an economic downturn, demand for construction may decrease, leading to lower prices and fewer transactions.
- The cost of materials and supplies can also play a significant role in determining your business's average price and number of monthly transactions. Fluctuations in the cost of materials, such as lumber or steel, can directly impact your pricing and potentially limit the number of projects you can take on due to increased expenses.
- The availability of skilled labor can also affect your business's average price and number of monthly transactions. If there is a shortage of skilled labor in your area, you may have to pay higher wages to attract and retain workers, which can increase your costs and potentially impact your pricing. Additionally, a shortage of skilled labor may limit your ability to take on multiple projects simultaneously, resulting in fewer monthly transactions.
- The housing market can also be a significant driver for the construction industry and your business's average price and number of monthly transactions. Changes in the housing market, such as an increase in demand for new homes, can lead to more construction projects and potentially allow you to charge higher prices. On the other hand, a decline in the housing market could result in fewer projects and potentially lower prices.
- The availability of financing options for construction projects can also impact your business's average price and number of monthly transactions. If financing options are limited, potential clients may be unable to secure the necessary funds to move forward with a project, resulting in fewer transactions. On the other hand, if financing options are readily available, clients may be more willing to take on larger and more expensive projects, potentially increasing your average price and number of transactions.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
Need inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
The next step is to estimate the costs you’ll have to incur to operate your construction company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your construction company's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, and benefits for all employees, including construction workers, project managers, and administrative staff.
- Accountancy fees: You will need to hire a professional accountant to handle your company's financial statements, tax returns, and other financial matters.
- Insurance costs: As a construction company, you will need various insurance policies, such as liability insurance, workers' compensation, and property insurance, to protect your business from potential risks and liabilities.
- Software licenses: You may need to purchase software licenses for project management, accounting, and other business operations.
- Banking fees: This includes charges for maintaining business bank accounts, wire transfers, and other banking services.
- Materials and supplies: As a construction company, you will need to purchase various materials and supplies, such as lumber, concrete, and tools, to complete your projects.
- Equipment rental: You may need to rent heavy equipment, such as bulldozers and cranes, for specific projects instead of purchasing them outright.
- Subcontractor fees: You may need to hire subcontractors, such as electricians and plumbers, for specialized tasks on your construction projects.
- Permits and licenses: You will need to obtain permits and licenses from the government for your construction projects, which may come with fees.
- Travel expenses: If you have projects in different locations, you will need to cover travel expenses for your employees, such as airfare, lodging, and meals.
- Marketing and advertising: To attract clients and promote your services, you may need to invest in marketing and advertising efforts, such as website development, print ads, and digital marketing campaigns.
- Rent or mortgage: If you have an office or warehouse space, you will need to pay rent or mortgage for the property.
- Utilities: This includes electricity, water, and other utility bills for your office or warehouse space.
- Training and development: To ensure your employees have the necessary skills to complete projects efficiently, you may need to invest in training and development programs.
- Legal fees: You may need to hire a lawyer to review contracts, handle claims, and provide legal advice for your construction company.
This list is not exhaustive by any means, and will need to be tailored to your construction company's specific circumstances.
What investments are needed to start or grow a construction company?
Once you have an idea of how much sales you could achieve and what it will cost to run your construction company, it is time to look into the equipment required to launch or expand the activity.
For a construction company, capital expenditures and initial working capital items could include:
- Construction Equipment: This includes heavy machinery such as excavators, bulldozers, and cranes that are necessary for completing construction projects. These items can be expensive, but they are essential for the success of your construction company.
- Vehicles: As a construction company, you may need a fleet of vehicles to transport materials, equipment, and workers to different job sites. This can include trucks, vans, and other vehicles that are specifically designed for construction purposes.
- Office Space: Your construction company will need a physical office space to manage administrative tasks and hold meetings. This can include purchasing or leasing a building, as well as any necessary renovations or maintenance.
- Tools and Supplies: In addition to heavy machinery, your construction company will also need various tools and supplies to complete projects. This can include items such as power tools, safety equipment, and building materials.
- Real Estate: If your construction company builds and sells properties, then you may need to invest in real estate as a capital expenditure. This can include purchasing land or existing buildings, as well as any necessary renovations or improvements.
Again, this list will need to be adjusted according to the specificities of your construction company.
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The next step in the creation of your financial forecast for your construction company is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
Now let's have a look at the main output tables of your construction company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your construction company is likely to be in the years to come.
For your construction company to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established construction companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your construction company's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow forecast
Your construction company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the construction company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your construction company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your construction company's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
Which tool should you use to create your construction company's financial projections?
Building a construction company financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial projection software to build your construction company's forecast
The modern and easiest way to build a forecast is to use professional financial projection software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here .
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional construction company financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your construction company's financial forecast?
Creating an accurate and error-free construction company financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built for this.
Use our financial forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your construction company future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a construction company, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.
Also on The Business Plan Shop
- Example of financial forecast
Know someone who owns or is thinking of starting a construction company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
Guillaume Le Brouster is a seasoned entrepreneur and financier.
Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.
Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.
Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.
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Developing a Great Construction Business Strategy + Strategic Plan Template
If you’re an entrepreneur looking to start a construction business, you’ll need to develop an excellent construction business strategy. A well-crafted construction business strategy will help you identify and capitalize on opportunities in the industry and set realistic goals and objectives for your new business.
This article will discuss why you need a good construction business strategy, how to develop a construction business strategy, and provide a construction business strategic plan template.
Why You Need a Good Construction Business Strategy
The construction industry is highly competitive, and construction businesses that don’t have a well-defined strategy are at a disadvantage. A good construction business strategy will help you:
- Understand the construction industry landscape
- Identify opportunities for growth
- Set realistic goals and objectives
- Develop a plan for marketing and sales
- Secure funding from investors
How to Develop a Great Construction Business Strategy
There are a few key steps you’ll need to take when developing your construction business strategy.
Create a Mission Statement
The first step is to create a mission statement. Your mission statement should briefly describe what your construction business does, who it serves, and what sets it apart from the competition.
For example, here’s a potential mission statement for a construction business:
“XYZ Construction is a leading provider of construction services in the XYZ region. We serve commercial and residential clients, and our team is dedicated to providing the highest quality of workmanship possible.”
Conduct a SWOT Analysis
Once you’ve crafted your mission statement, you’ll need to conduct a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This analysis will help you identify your construction business’s key strengths and weaknesses, as well as any opportunities or threats in the marketplace.
Some questions you may want to consider during your SWOT analysis include:
- What are our construction company’s core strengths?
- What do we do better than our competitors?
- What are our construction company’s weaknesses?
- Are there any areas where we can improve?
- What opportunities exist in the construction industry landscape?
- What trends are happening in the construction industry that we can capitalize on?
- Are there any threats to our construction business that we need to be aware of?
Develop Your Goals and Objectives
After you’ve conducted your SWOT analysis, you’ll need to develop goals and objectives for your construction business. Your goals should be specific, measurable, achievable, relevant, and time-bound. In other words, they should describe what you want to achieve and when you want to achieve it.
Some examples of goals for a construction business include:
- Increase revenue by 10% in the first year of operation
- Acquire 50 new clients in the first year of operation
- Expand into new markets within the first five years of operation
Your objectives should support your goals and help you achieve them. They should be specific, measurable, achievable, relevant, and time-bound like your goals.
Some examples of objectives for a construction business include:
- Develop a marketing plan to acquire 50 new clients in the first year of operation
- Research construction trends in new markets and develop a plan to expand into those markets within the first five years of operation
- Implement cost-saving measures to increase revenue by 10% in the first year of operation
Create a Marketing Plan
Once you’ve developed your construction business goals and objectives, you’ll need to create a marketing plan. Your marketing plan should include strategies for promoting your construction business and acquiring new clients.
Some marketing ideas for a construction business include:
- Creating a website and blog
- Developing an SEO strategy
- Creating social media profiles
- Creating marketing collateral (e.g., brochures, flyers, etc.)
- Advertising in construction trade publications
- Sponsoring construction industry events
Develop a Sales Plan
In addition to your marketing plan, you’ll also need to develop a sales plan. Your sales plan should include strategies for selling your construction services and closing new deals.
- Some sales ideas for a construction business include:
- Creating a process for qualifying leads
- Developing scripts for sales calls
- Training employees on the sales process
- Creating a system for tracking sales progress
- Setting sales targets and incentives
Create A Financial Plan
Last but not least, you’ll need to create a financial plan. Your financial plan should include your construction business’s operating budget and strategies for funding your construction projects.
Some financial planning tips for a construction business include:
- Creating a construction project budget
- Developing a system for tracking construction costs
- Identifying sources of construction funding
- Securing construction loans
- Negotiating payment terms with clients
- Managing construction project cash flow
Develop an Implementation Plan
After you’ve developed your construction business strategy, you’ll need to create an implementation plan. This plan will outline the steps you need to take to put your construction business strategy into action.
Some things to consider when creating an implementation plan for a construction business include:
- Assigning roles and responsibilities
- Setting timelines
- Establishing milestones
- Creating a system for tracking progress
- Allocating resources
Evaluation and Adjustment
Once you’ve implemented your construction business strategy, you’ll need to evaluate its performance and make adjustments as necessary. This evaluation should be ongoing to ensure that your construction business strategy remains relevant and effective. Some things to consider when evaluating and adjusting your construction business strategy include:
- Reviewing financial performance
- Conducting customer surveys
- Analyzing website traffic
- Studying construction industry trends
Construction Business Strategic Plan Template
Now that you know how to develop a construction business strategy, you can use our strategic plan template. This template will help you organize your thoughts and create a roadmap for your construction business.
Business Strategic Plan Template
Mission Statement:
What is the purpose of your construction business? What do you hope to achieve?
Vision Statement:
What does your construction business look like in the future? What are your long-term goals?
SWOT Analysis:
Weaknesses:
Opportunities:
Goals and Objectives:
What are your construction business goals? What are your objectives? How will you achieve them?
Marketing Plan:
How will you promote your construction business and acquire new clients?
Sales Plan:
How will you sell your construction services and close new deals?
Financial Plan:
What is your construction business’s budget? How will you fund your construction projects?
Implementation Plan:
How will you implement your construction business strategy? Who is responsible for each task? When will each task be completed?
Evaluation and Adjustment Plan:
How will you evaluate the results of your construction business strategy? What adjustments will you make if necessary?
Now that you have a construction business strategy template, you’re ready to start developing your construction business strategy. Use the template as a guide, but don’t be afraid to get creative and think outside the box.
The most important thing is that your construction business strategy is tailored to your specific construction business and its unique needs.
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Construction Company Business Plan Template
AUG.30, 2013
Construction Company Business Plan for Starting Your Own Building Firm
The construction industry is immensely profitable and a large number of people are trying their hand at it. However, merely entering the business plan of a construction company and starting a company is not enough. You have to create a formidable business plan of a construction company in order to have direction and a proper plan. Not doing so could lead to unfavorable circumstances, resulting in massive losses.
Are you looking to start your very own construction company? If the answer is yes, continue reading this article, as it discusses everything you need to know about creating a well thought out construction company business plan.
Executive Summary
Quite a lot of people ask “how to start a construction business?” Well, starting with a detailed construction company startup plan would be the best idea. The first thing to include in your plan should be the executive summary. For those who don’t know, the executive summary provides a concise look at your intent behind starting a business plan of a construction company (in this case, a construction company.)
This portion will essentially show potential investors what they can expect from your proposal, ensuring they become acquainted with the business plan of a construction company overall material. Use the executive summary to discuss how you plan to manage your upcoming construction company, your potential customers, and your target. It is an excellent way to show readers that you did your research and are motivated to get your business plan of a construction company up and running the right way.
Company Summary
Whenever someone shows you an example of a business plan for a construction company, it will include a detailed company summary after the executive summary. This portion of your proposal will highlight your brand and how you plan to market and promote it. You should also consider discussing how you plan to improve your construction business’s web presence, making sure you show potential investors that you are serious about generating profits.
The company summary section should also provide answers to important questions like why you started a company, who the owner is, and how they started the business plan of a construction company .
Owning your own construction company is a big deal and every investor wants to know about the services you offer. Therefore, you should pay special attention to this portion, as it could make or break your construction company business plan. Fortunately, this part will be quite straightforward as construction companies quite limited when it comes to the range of services they offer. Nevertheless, you should still mention the services provide, convincing investors that you know what you are doing.
Marketing Analysis of Construction Company
When jotting down construction business concepts in your proposal, you should create a separate section for marketing analysis. This portion of your business plan of a construction company will provide readers a detailed layout about the construction industry’s market trends and segmentation. You should also mention your target market and explain the reasons behind targeting specific audiences.
What’s more, the marketing analysis must include a well thought out pricing strategy as investors want to know how much you plan to charge for your services or products. Consider studying your target market and analyzing prices to make sure you have enough data to justify your prices, increasing your chances of getting adequate funding to start your construction company.
Marketing Strategy
As mentioned earlier, running a successful business plan of a construction company is not as easy as most people think. There are a lot of complications involved in it, which could lead to losses and may even cause you to close shop. Therefore, it is essential to show your potential investors why you are competent enough to run a construction company that generates excellent profits.
The best way to prove that you are worthy of getting investments is by creating a detailed marketing strategy containing stats and data to support your claims. If you take a close look at any marketing plan for business plan of a construction company , you will notice they discus monthly and yearly sales, profit forecasts, and competitive analysis.
Some proposals also have diagrams, charts, and tables to indicate your construction businesses expected trajectory, showing people that you have a clear strategy to make money.
Personnel Plan
Investors, especially if they have years of experience, are quite vigilant when it comes to helping out up-and-coming businessmen. Letting them know who will work in your construction company and what their roles will be could make them more relaxed. You can do this by creating a section named “Personnel Plan”. It is an important section when writing a plan of a business for a construction company as it highlights your company’s staff and the average salary of your potential employees.
This portion should also mention the roles of your company’s staff members and their overall contribution. It would be best if you make a thorough, detailed personnel plan and provide an estimate of your workers’ annual salaries. Once again, you should do a fair amount of research to make sure you get the correct facts and figures as your investment for business depends on it.
Financial Plan
Many people create a business plan for a construction company, but very few succeed. Why? Because the ones who fail often provide a lackluster financial plan and in some cases, people don’t even bother mentioning it. The financial plan is arguably the most important part of your construction company business plan. It should be stat heavy and discuss how you intend to manage your business’s finances.
Every successful business plan of a construction company proposal includes a brake-even analysis, monthly and yearly profit business plan of a construction company , business ratios, projected profits and losses, and other critical elements. Remember, business proposals without financial plans are a deal breaker for most investors and will significantly reduce your chances of getting funded.
The appendix will be the last section of your construction company’s business plan and will contain detailed information regarding its essential talking points. Adding some extra documents, charts, and tables, pertinent to your upcoming business is a great way to get people’s attention, showing that you are serious about starting a construction company.
Download Construction Company Business Plan Template in pdf`
Professional writers OGS capital specialized also on the theme architecture firm business plan , engineering consulting business plan , HVAC business plan , interior design business plan and etc.
OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.
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Construction Business Plan Template
Construction industry analysis.
In your industry analysis, you need to provide an overview of the construction business.
While this may seem unnecessary, it serves multiple purposes.
First, researching the construction business industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards decaffeinated construction business consumption, it would be helpful to ensure your plan calls for plenty of decaffeinated options.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your construction business plan:
- How big is the construction business (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your construction business. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local market size.
Note that trends are particularly important in the construction business. Economic trends, such as the boom and bust cycle of the nation, region, or specific locale you are in, drive a lot of the investment activity which leads to construction, whether it is homes, commercial, roads, bridges and tunnels. As such, be sure to research and include trends in your business plan.
CONSTRUCTION BUSINESS PLAN OUTLINE
- Construction Business Plan Home
- 1. Executive Summary
- 2. Company Overview
- 3. Industry Analysis
- 4. Customer Analysis
- 5. Competitive Analysis
- 6. Marketing Plan
- 7. Operations Plan
- 8. Management Team
- 9. Financial Plan
- 10. Appendix
- Construction Business Plan Summary
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How to manage cash flow throughout the construction lifecycle.
Last Updated Feb 21, 2024
Navigating the financial ebbs and flows of construction projects demands a deep understanding of how to manage cash flow.
Cash flow management in construction is the practice of overseeing and optimizing the balance between the funds coming into and going out of a project. It's about ensuring there is enough cash available to meet the project's immediate needs — such as paying for labor, materials and equipment — while also securing timely payments from clients. This process requires careful planning, monitoring of income and expenditures and strategic timing of payments to maintain financial stability and prevent project delays or the need for emergency funding.
In this article, we’ll examine the ins and outs of measuring and managing cash flow in construction, including tips on how to maintain positive cash flow on projects.
Table of contents
What is cash flow?
Cash flow in construction refers to the movement of funds into and out of a construction project over a specific period. It's the lifeblood of any construction project, determining its financial health and operational viability. Essentially, it tracks the cash that flows in from clients and financing sources against the cash that flows out for project expenses like labor, materials subcontractor payments and equipment costs.
A robust cash flow ensures that work on the construction site continues uninterrupted. Without it, payments to workers and suppliers are delayed, leading to halted operations and potentially causing the project to stall. Maintaining a positive cash flow is not just about balancing the books but about ensuring that the work progresses and the job site remains active and productive.
Cash flow management takes on heightened significance in the construction industry due to the long-term nature of projects with significant upfront costs and staggered income. Payments from clients typically come in stages, often linked to project milestones or the percentage of work completed , while expenses need to be covered continuously. This creates a situation where managing the timing and amount of cash inflows and outflows becomes critical.
A positive cash flow means that a construction project is receiving more money than it is spending, which is essential for keeping a project moving forward without interruption. This status allows a construction firm to cover its bills on time, invest in necessary resources and even save for future projects. On the other hand, a negative cash flow indicates that a project is spending more money than it is bringing in, leading to potential delays, the need for additional financing, or, in the worst cases, halting the project entirely.
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Strategies to Maintain Positive Cash Flow
Achieving and sustaining a positive cash flow is a key component of financial health on construction projects and requires strategic foresight and diligent management.
Let’s examine some practical tips and strategies designed to help construction professionals navigate the financial complexities of keeping cash flow robust and projects on track. From optimizing billing practices to managing expenses and leveraging technology, these insights aim to bolster a project's cash position.
1. Leverage cash flow projection reports.
Utilizing cash flow projection reports is crucial for effectively managing and forecasting future cash positions. These reports provide valuable insights into upcoming cash inflows and outflows, allowing construction firms to plan ahead and make informed decisions.
By regularly updating and reviewing these projections, companies can anticipate potential shortfalls or surpluses and adjust their strategies accordingly. This proactive approach to cash management helps ensure financial stability and supports strategic decision-making for future project planning and investment.
2. Implement a pay-when-paid clause in contracts.
Maintaining a healthy cash flow requires ensuring invoices are approved upstream (by clients) before approving downstream invoices (for example, to subcontractors and suppliers). Incorporating a "pay-when-paid" clause — which is common in Guaranteed Maximum Price (GMP) contracts — is an effective strategy. This clause means that subcontractors and suppliers are paid only after the general contractor has received payment from the client, aligning cash outflows with inflows and helping to mitigate the risk of cash shortages.
3. Diversify your work portfolio.
Relying heavily on a single large contract poses a significant financial risk, especially for subcontractors due to the "pay when paid" clause that is common in many contracts. The real danger of this financial dependence becomes all too clear when unexpected delays in payment occur, which can have catastrophic effects on a business's cash flow and overall viability.
For example, consider a painting subcontractor engaged in a massive $2 million project and found themselves in a bind with $400,000 worth of frozen payments were frozen for six months due to disagreements between the general contractor and the project owner. This project constituted a major portion of the subcontractor's business, making the delayed payment not just a setback but a critical blow to the company's overall financial health.
As the payment delay extended, the painting subcontractor found themselves unable to pay their workers. Without the necessary compensation for their time, the painters stopped coming to work, halting progress on the project. This standstill not only affected the immediate job but also the contractor's reputation and ability to secure future work. Eventually, the lack of cash flow, compounded by the inability to complete work and generate income, led to the business's downfall. This stark example illustrates the domino effect that can result from over-reliance on a single source of income, especially in an industry where cash flow is the engine of daily operations. It emphasizes the importance for construction firms to maintain a diversified portfolio of projects, spreading financial risk and ensuring that the failure or delay of one project does not jeopardize the entire business .
4. Understand the true cost of capital
The cost of capital , whether it's in the form of interest on loans or reduced profit margins from early payment discounts, should be carefully weighed. Firms should strategize to optimize their cash reserves and manage their payment terms in a way that balances the need for immediate liquidity with the overarching goal of maintaining or enhancing profitability. By doing so, they can avoid the expensive trap of relying too heavily on costly financing options or concessions to generate quick cash, preserving their financial health and ensuring sustainable growth.
5. Implement a robust job costing process.
Integrating a sophisticated job costing system, enhanced by the use of cost codes, is a key piece of managing the cash flow of current and future projects effectively. This system tracks every expense related to current jobs, providing real-time visibility into cash outflows, while also allowing the analysis of historical project data to inform future cash flow projections.
Utilizing cost codes assigns specific expenses to distinct categories, offering a detailed view of where and how funds are being spent. This level of detail aids in identifying potential cash flow issues early on and facilitates strategic decisions based on past performance trends. By leveraging both current and historical job cost data, construction firms can navigate the financial landscape with greater precision and accuracy, ensuring a healthier cash flow management strategy.
6. Establish an effective invoicing system.
An effective invoicing system enables quick identification of discrepancies between the amounts billed to the owner and the costs incurred on the project. By quickly identifying differences between billed amounts and incurred expenses, construction companies can address billing errors, disputes, or omissions more effectively , ensuring that revenue recognition is maximized and cash flow disruptions are minimized.
An effective invoicing system also facilitates faster billing processes, reducing the time between completing work and receiving payment, thereby improving the overall cash position of the firm. This proactive approach to invoicing not only tightens financial control but also supports a smoother, more reliable cash flow cycle.
7. Integrate project management and accounting software.
Utilizing sophisticated project management software that is fully integrated with an accounting system offers a streamlined approach to cash flow management. This integration allows for the seamless automation of financial transactions, including meticulously tracking invoices issued to clients and their reconciliation with the project's incurred expenses.
The synergy between project management and accounting software eliminates the need for manual oversight of every financial detail, a task that would otherwise require extensive time, organization and effort . By automating these processes, the software not only helps streamline financial management but also minimizes the risk of errors, ensuring more accurate billing and expense tracking. This comprehensive approach provides a clearer financial picture, facilitating better cash flow management — and freeing up resources to focus on project delivery and firm growth.
8. Leverage different contract types to enhance cash flow management.
Effective cash flow management in construction can significantly benefit from a strategic mix of contract types . This approach diversifies revenue streams and introduces variability in cash flow timing, which can be critical for maintaining liquidity and financial stability.
Let’s examine the case of a general contractor that specializes in both high-rise buildings and shopping center project types. The shopping center projects, undertaken on a lump sum basis, allow for billing based on project progress milestones rather than the submission of detailed expense reports required by the GMP contracts typically used for high-rise construction. This distinction means that, under lump sum contracts , the contractor can often invoice and receive payment more promptly, as payments are tied directly to progress rather than the verification of costs incurred.
This quicker payment feature that is common for lump sum contracts means that, despite representing a smaller portion of the contractor's overall project portfolio in terms of total contract value, the shopping center projects can disproportionately enhance the firm's cash flow. Such projects can inject liquidity into the business, providing a financial cushion that is invaluable for covering the operational costs associated with larger, GMP-based projects. This mix of contract structures creates a financial buffer, enhancing the company's ability to manage cash flow effectively across all projects. Additionally, it boosts profitability by reducing the necessity for external capital to cover any cash shortages.
9. Implement routine reviews of your cash position.
Setting a routine for monitoring your cash flow against forecasts is crucial to help maintain positive cash flow. Regular reviews, whether weekly, monthly, or quarterly, based on the scale and intricacy of your business, enable you to spot financial trends, oversee liquidity effectively and make decisions grounded in data. This disciplined approach allows for maintaining financial stability and fostering an environment for informed strategic planning.
10. Building a financial safety net through a cash reserve.
Establishing and sustaining a cash reserve acts as a protective buffer for projects, safeguarding against unexpected financial shortfalls and the myriad of unforeseen challenges that can arise in construction. By allocating funds into this reserve, construction firms can equip their business to handle unexpected issues without resorting to high-interest emergency loans or making rushed financial decisions. This strategic foresight not only stabilizes cash flow but also ensures the continuity and financial health of construction projects, even under unpredictable circumstances.
The Importance of Managing Cash Flow
By implementing strategies such as regular cash flow monitoring, maintaining a cash reserve, leveraging technology for invoicing and payments, and diversifying project and contract types, construction businesses can navigate the complexities of the industry's financial landscape. A proactive approach to cash flow safeguards against potential financial pitfalls and paves the way for sustainable growth and stability.
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TJ Forbes is a Senior Solutions Engineer at Procore, specializing in financials products, analytics, ERP integrations, workflows, reporting and accounting solutions. He previously worked as a financial manager and project accountant for Stiles, a commercial real estate firm in Ft. Lauderdale. TJ holds a Masters in Financial Management from Southern Adventist University.
Taylor Riso
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Taylor Riso is a marketing professional with more than 10 years of experience in the construction industry. Skilled in content development and marketing strategies, she leverages her diverse experience to help professionals in the built environment. She currently resides in Portland, Oregon.
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New York governor seeks to quell business owners’ fears after Trump ruling
Kathy Hochul says law-abiding businesspeople have ‘nothing to worry about’ after question on state’s commercial climate
The New York governor has told business owners in her state that there is “nothing to worry about” after Donald Trump was fined $355m and temporarily banned from engaging in commerce in the state when he lost his civil fraud trial on Friday.
In an interview on the New York radio show the Cats Roundtable with the supermarket billionaire John Catsimatidis, Kathy Hochul sought to quell fears in some quarters that the penalties handed to Trump for engaging in fraudulent business practices could chill the state’s commercial climate.
Asked if businesspeople should be worried that if prosecutors could “do that to the former president, they can do that to anybody”, Hochul said: “Law-abiding and rule-following New Yorkers who are businesspeople have nothing to worry about because they’re very different than Donald Trump and his behavior.”
She added that the fraud case against Trump resulted from “really an extraordinary, unusual circumstance”.
Hochul’s comments were directed at some New York business leaders who said they were concerned that the attorney general Letitia James ’s case against Trump could deter businesses and investment from coming to the state. Hochul noted James’s case demonstrated how Trump and some allies obtained favorable bank loans and insurance rates with inflated real estate values.
The governor said most New York business owners were “honest people, and they’re not trying to hide their assets and they’re following the rules”.
Hochul said most business owners would not merit state intervention.
“This judge determined that Donald Trump did not follow the rules,” Hochul added. “He was prosecuted and truly, the governor of the state of New York does not have a say in the size of a fine, and we want to make sure that we don’t have that level of interference.”
Trump, who denied wrongdoing in the case and maintained there were no victims, now has 30 days to come up with a non-recoverable $35m to secure a bond – a third-party guarantee – against his real estate holdings to show that he can pay the full fine if his appeals fail.
Alternatively, he could put the $355m into an escrow account but would get the money back if he wins on appeal.
Either way, the ruling is a blow to the developer-politician whose sense of self is tied to financial success. And James has said Trump is actually in line to pay more than $463m when interest is taken into account.
In September, Trump’s former lawyer Christopher Kise argued in court that the decision against the ex-president would cause “irreparable impact on numerous companies”. It would also threaten 1,000 employees within the Trump empire, Kise maintained.
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But the judge, Arthur Engoron, who found the former president liable for fraud and assessed the fine and three-year disqualification from doing business in New York, dropped an earlier ruling to dissolve all the companies that Trump owns in the state that could have led to a liquidation.
“This is a venial sin, not a mortal sin,” Engoron wrote in a 92-page ruling that allowed the Trump businesses to keep operating and appointed two overseers to monitor “major activities that could lead to fraud”.
Engoron said he could renew his call for “restructuring and potential dissolution” based on “substantial evidence”.
Trump has lashed out at the ruling, vowing to appeal and calling James and Engoron “corrupt”.
But James said on Friday: “This long-running fraud was intentional, egregious, illegal.” She added: “There cannot be different rules for different people in this country, and former presidents are no exception.”
This article was amended on 18 February 2024 to correct a misspelling. An earlier version referred to “venal” rather than “venial” sin.
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https://www.barrons.com/advisor/articles/lpl-financial-high-net-worth-services-advisors-dfc667df
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LPL Financial Expands Services for Advisors Who Serve High-Net-Worth Clients
LPL Financial is expanding the services it offers to its financial advisors to help them serve wealthy clients.
LPL Financial reported better-than-expected financial results earlier this month.
The San Diego-based company said this week that its high-net-worth services now include advanced financial planning, estate and philanthropic planning, and customized portfolio construction, among other offerings. Those services are in addition to tax planning, which LPL announced in October .
LPL says a dedicated team of experts with significant experience will provide the services.
“We’re making it easy for our advisors to be even more competitive in their markets and to acquire and retain relationships with high-net-worth and ultrahigh-net-worth families,” says Jen Hollers, senior vice president of planning and advice services at LPL. “Our advisors now have the option to tap into a group of tenured professionals that include attorneys, CPAs, and veteran advanced planners to execute around building, maintaining, and servicing these families with complex needs.”
LPL didn’t respond immediately to a question about what the services would cost advisors and/or their clients.
Wealthy and ultrawealthy families typically require more than just investment management and basic financial planning. They often need help with estate planning as they prepare to pass down wealth to the next generation, tax planning, and charitable giving.
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Those needs have been driving wealth management practices serving high-net-worth clients to increase the services they offer in recent years, according to a recent report from research firm Cerulli Associates, which defines high-net-worth investors as those with at least $5 million in investible assets. For example, 70% of high-net-worth practices offered estate planning in 2023, up from 56% in 2017, the report said. And the percentage of high-net-worth practices offering tax planning jumped to 45% from 29% during that period.
High-net-worth households control a growing amount of wealth, with the total increasing by more than $23 trillion since 2011, Cerulli says.
LPL works with more than 22,000 financial advisors. Founded in 1989, the company’s roots are as an independent broker-dealer, meaning it serves as the brokerage platform for advisors who own and operate independent practices and work as 1099 independent contractors to LPL.
That’s still an important part of LPL’s business, but the company has expanded its capabilities so it can work with financial advisors in a variety of ways. LPL now hires some advisors as W-2 employees, serves as a custodian to registered investment advisor firms, and provides extra assistance to some 1099 advisors in setting up and running their practices.
LPL is publicly traded, and its shares have risen 11.6% so far this year. The company reported stronger-than-expected earnings earlier this month.
Write to Ross Snel at [email protected]
LPL Financial is expanding the services it offers to its financial advisors to help them serve wealthy clients.
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For example, let's say a client approached you with a $100,000 contract, that would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for supplies, equipment rentals, employee salaries, etc. But let's say the company didn't pay you for 180 days. During that 180 day period, you could run out of money.
A financial plan for a construction company is an essential roadmap guiding you through the financial aspects of your construction business. Think of it as laying the foundation for a building project: You need to know the resources at your disposal, what you aim to build, and the costs associated with constructing your projects.
You can easily download the construction business plan (including a full, customizable financial model) to your computer here <- Sample Construction Business Plan Outline Below is a construction business plan example to help you create each section of your own construction business plan: Executive Summary Business Overview
FINANCIAL PLAN This should include estimates of your expected revenue, expenses, and profits for the first few years of operation. [Sender.Company] will generate revenue through the sale of construction services to residential, commercial, and industrial clients.
Here are six key components of a successful construction business plan. 1. Executive summary. An executive summary is an overview of your construction business plan. Think of it as the CliffsNotes version of your business plan—it gives readers the basics of your business's goals, financial projections, strategies, and more.
Financial Considerations We expect to be profitable during the first year of operations. Despite initial large outlays in cash to promote sales, the company's cash account is expected to remain healthy. The company expects to earn approximately 1.5 million dollars in revenue by Year 3. 1.1 Mission
Expectations Forecast Fosse has only a small amount of debt and intends to stay that way. We expect to see increased profits from our market shift efforts by the end of Year 2. Over the next three years we expect lower profits as we make inroads into this tough market.
A construction company business plan is a formal written document describing your company's business strategy and feasibility. It documents the reasons you will succeed, your areas of competitive advantage, and it includes information about your team members.
How to write a business plan for a construction company? Why write a business plan for a construction company? What information is needed to create a business plan for a construction company? How do I build a financial forecast for a construction company? The written part of a construction company business plan
Construction Company Business Plan Template. If you want to start a construction business or expand your current one, you need a business plan. Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow all types of construction businesses, including commercial construction, building construction and residential construction.
A standard business plan for a construction company typically includes sections such as: Executive Summary Marketing Company Description Market Research Management
1 million businesses. Download a free construction business plan template with SBA-approved format. Includes pre-filled examples and step-by-step guides for a successful start.
Financial plan: how much profit and revenue do you expect in the next 5 years? When will you reach the break-even point and start making profits? You can include here a chart with your key financials (revenue, gross profit, net profit) Funding ask: what loan/investment/grant are you seeking? How much do you need? How long will this last?
A business plan is to your business what blueprints are to your construction projects. It's a written document that outlines your business goals, the strategies you will use to reach those goals, and a timeline for reaching them. Goals and strategies may be the most important (and actionable) parts of your business plan, but a properly ...
The 50 U.S. construction companies with the highest annual revenue all made more than $1.5 billion in 2020, with the highest-grossing company topping $14.4 billion. This is the level thousands of construction companies in the U.S. and around the world are trying to reach, and the fight to get there is fierce.
Construction financial management is allocating and accounting for financial resources to cut project costs, maximise profits and assure long-term company financial health. Every decision impacts your financial position. That's why in proper financial management, every process matters, from small purchases to structural changes on a business level.
A construction company plan is an important document for acquiring funding and bank loans. Write an exceptional plan with this detailed guide and also check the free template that will ease your plan writing. Download Template Create a Business Plan Growing a construction company is much more difficult and taxing than completing projects.
The financial plan outlines the monetary aspects of your construction business. It includes details about how you plan on raising money for your business, projected revenues, expenses and profitability timelines. Make sure to define how your construction company will be initially funded, whether through personal investment, loans or investors.
Who do we help? Why create and maintain a financial forecast for a construction company? Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your construction company.
Some examples of goals for a construction business include: Increase revenue by 10% in the first year of operation. Acquire 50 new clients in the first year of operation. Expand into new markets within the first five years of operation. Your objectives should support your goals and help you achieve them. They should be specific, measurable ...
Every successful business plan of a construction company proposal includes a brake-even analysis, monthly and yearly profit business plan of a construction company, business ratios, projected profits and losses, and other critical elements. Remember, business proposals without financial plans are a deal breaker for most investors and will ...
In your industry analysis, you need to provide an overview of the construction business. While this may seem unnecessary, it serves multiple purposes. First, researching the construction business industry educates you. It helps you understand the market in which you are operating. Secondly, market research can improve your strategy particularly ...
We proudly present our bespoke range of Construction Financial Model Templates, meticulously designed for entrepreneurs, business owners, and financial professionals in the construction sector. Our construction company business plan templates are not just spreadsheets but a roadmap to success. Crafted with industry-specific nuances, they help ...
A business proposal for a construction company should contain the costs, market research, scope of work, dates, and roadmap for achieving the project's vision. Construction companies can use digital solutions to speed up the process of drafting, reviewing, and signing business proposals.
What is cash flow? Cash flow in construction refers to the movement of funds into and out of a construction project over a specific period. It's the lifeblood of any construction project, determining its financial health and operational viability. Essentially, it tracks the cash that flows in from clients and financing sources against the cash that flows out for project expenses like labor ...
The New York governor has told business owners in her state that there is "nothing to worry about" after Donald Trump was fined $355m and temporarily banned from engaging in commerce in the ...
A five-year financial plan hones in on just one area: your money. Creating a financial five-year plan can help you gauge where you're at now, get clear on where you want to go, chart your course and stay motivated to get there. Here are five steps you can follow to create your own five-year financial plan.
Donald Trump's planned appeal of a $355 million judgment against him in his civil fraud case may focus on the former president's contention that there were no actual victims from his conduct at ...
The company is offering its advisors assistance with estate and philanthropic planning, customized portfolio construction, and other services aimed at high-net-worth and ultrahigh-net-worth clients.